Silver, salvage and state immunity

It is a long way from the Indian Ocean to Westminster Square, even longer when you start from the seabed and have to define the law of state immunity along the way. But last week’s Supreme Court judgment in Argentum Exploration v Republic of South Africa has been widely welcomed as a journey that finally ended up in the right place.

The story started in Mumbai (then Bombay) in November 1942 when the steam passenger liner Tilawa of the British India Steam Navigation Company embarked for Durban. On board: 700 Indian civilians emigrating for a better life elsewhere in the British Empire -places such as South Africa and Uganda - and 200 British-officered crew. Plus 2,364 bars of silver bullion bound for the South African mint.

Just over halfway across the Indian Ocean, the Tilawa was spotted by the Japanese long-range submarine I-29. By the standards of 1942, Tilawa was a legitimate enough target: British India ships regularly carried troops and, even if the Tilawa carried nothing military, sinking her would deprive the allies of a troopship. In the I-29, Lt Commander Juichi Izu fired two successive torpedoes, then slipped away leaving more than 700 survivors in lifeboats and clinging to Carley floats. Amazingly, 678 were still alive when a British warship reached them two days later: the Tilawa’s ‘sparks’, radio officer Edmund Duncan, had remained at his post to send out the vital SOS.

It was far from the worst such tragedy of the war. But the Tilawa disaster is still remembered in India, especially by the descendants of the victims. Questions are still asked about why it was allowed to sail unescorted and why a Japanese submarine was so determined to sink an apparently innocuous target.

But, predictably enough, as deep-sea diving technology improved over the decades, it was the inanimate part of the cargo, lying 2,500 metres down, which attracted the biggest international interest.

In a brilliant five-month salvage operation, the Tilawa's silver was recovered by the MV Seabed Worker in 2017. Later that year it was shipped to the UK - on the assumption that it belonged to the UK government - and the salvage operator, Argentum, declared it to the Receiver of Wreck in expectation of negotiating a settlement for salvage.

The law of salvage, as anyone who has skippered a seagoing vessel knows, has unusual features. It can impose a liability on the owner of salved property  irrespective of whether they requested or consented to its rescue. The justification for the historic principle is the importance of incentivising rescue from the perils of the sea. The downside is that the prospect of a hefty claim dissuades owners from accepting early assistance: the 1981 Penlee Lifeboat disaster, for example, might have been averted had the master of the ship in difficulty accepted the offer of a earlier tow. Meanwhile any maritime lien created by salvage is enforceable against subsequent purchasers of the ship or cargo, whether or not they had knowledge of it. Such a claim may be served on the vessel by fixing a notice in a conspicuous position on the outside of the vessel (the time-honoured process of nailing it to the mast is impractical in the container ship era).

Argentum’s claim against the silver was complicated by the fact that the owner turned out to be not the UK government but the government of the Republic of South Africa (Which Argentum now accepts). But South Africa asknowledged Argentum's claim in the English courts purely for the purpose of arguing that it is entitled to state immunity i the jurisdiction under the State Immunity Act 1978. In 2022, the Court of Appeal disagreed, citing the act's exclusion covering  'commercial purposes': the silver had been bought under a commercial contract and was being transported by a commercial ship.

However after a ramble through the history of state immunity, Supreme Court justices led by Lord Lloyd Jones and Lord Hamblen disagreed. They favoured the dissenting CoA conclusion of Lady Justice Elisabeth Laing, who pointed it that, as a matter of ordinary language, silver sitting in a cargo hold is not ‘in use’ for commercial purposes. Moreover, its intended use, to be minted into coinage, was similarly non-commercial. Hence the act's exemption in the act did not apply. The Supreme Court also threw out a challenge under the Human Rights Act, ruling that by enacting the State Immunity Act, parliament had the legitimate aim of giving effect to the restrictive theory of immunity in international law. 

The ruling has gone down well with specialist lawyers. Jonathan Goulding, senior associate and mariner, at international firm HFW - which acted for the government of South Africa - commented that the ruling will provide a great deal of confidence for governments that valuable goods moving around the world will not be totally lost in the event that the ship carrying them is involved in an incident. 'In short, the court has firmly sent a message to those hoping to find and claim ownership of lost treasure that finders are not always keepers.'

Robert Volterra, partner at international firm Volterra Fietta, observed another implication: 'The UK’s historical vigilance in upholding international law had seemingly been waning alarmingly, with a series of English court judgments that were significantly eroding the principles of state and diplomatic immunity. In this context, the Supreme Court’s unanimous decision to grant the Republic of South Africa immunity from Argentum’s claim over the silver is very welcome.' Had the court supported another expansion, Volterra said, 'London’s status as a commercial, legal and diplomatic hub may well have been brought into question.' 

The judgment reveals that a settlement between the parties in the case was reached last month.

Meanwhile the wreck of the Tilawa still lies 2,500 metres under the blue seas of the Indian Ocean; the grave, among many others, of radio officer Duncan. Perhaps it will rest in peace.