SA wins landmark victory in top UK court

SA has won a landmark victory in the UK’s highest court in its protracted dispute over salvaged silver worth about $43m (R800m) lost in 1942 en route to the SA mint.

SA fended off the salvage company that recovered the silver in 2017 when it argued successfully that the company could not claim the silver or the salvage costs due to SA’s state immunity.

In 1942, during World War 2, the 10,000-tonne steamer SS Tilawa left Mumbai (then Bombay) for Durban, transporting about 1,000 people and 600 tonnes of cargo, including 2,364 bars of silver belonging to the then Union of SA. The government bought the silver for the SA Mint to manufacture coins.

As the Tilawa neared the Seychelles, two torpedoes from Japanese submarines hit it. The ship sank, with the loss of about 300 lives. Survivors spent two days at sea without food or water before being rescued by the British and returned to India.

According to Argentum Exploration, the silver was recovered in 2017 more than 2km beneath the ocean surface.

Argentum carried the silver to the UK, and sought a UK government declaration that Argentum was now the owner of the silver under salvage laws. However, Argentum eventually conceded that the silver belonged to SA, and instead sought to recover its claim for the salvage operation.

This meant suing the SA government for the right to ask for Argentum’s expenditure in the salvage operations.

In response, the SA government challenged the entire claim. SA argued that it could not be sued for recovery claims because it had state immunity in terms of international salvage laws.

Argentum, while acknowledging that SA would ordinarily have immunity, pointed to an exception in the law. The exception was that state immunity does not apply to a state’s cargo if it was “intended for use for commercial purposes”. SA did not dispute that the vessel was

being used for commercial purposes but it denied its own cargo, the bars of silver, was.

The UK Court of Appeal ruled in Argentum’s favour in 2022, finding that the silver was in fact being used at the time for commercial purposes, falling into the exception. SA therefore could not rely on its immunity as a state. SA appealed against this ruling to that country’s highest court, the Supreme Court of the UK.

UK Supreme Court judges David Lloyd Jones and Nicholas Hamblen, writing for a unanimous court, ruled in SA’s favour on Wednesday.

The judges noted that the determination of whether cargo is being “used” for commercial purposes to meet the exception is to look at the time the cargo was lost, namely the 1940s.

Argentum argued that in 1942, the silver was in use for commercial purposes because it was on a commercial ship and part of a commercial contract between the ship and the government at the time. However, the judges dismissed this. “Argentum’s submission encounters [a] difficulty,” the judges wrote, “to say that the silver was ‘in use’ by the government while it was being carried on the vessel simply does not accord with the ordinary and natural meaning of those words.” The judges said it was merely “siting in the hold of a ship” and would be a “distortion of language” to claim that, just because it was on a commercial ship, it was being “used” for commercial purposes.

They held that the SA government “is immune” because the cargo was intended for “non-commercial purposes”.

The judges also noted that UK courts — and courts in general — ought to be cautious when deciding on “property of foreign states” that will be used “for sovereign purposes”. This could lead to “impermissible interference with sovereign functions of the foreign state”. The UK court ruling on silver intended for SA’s mint was cited as an example.

The judges found that the SA government is “entitled ... to immunity” from Argentum’s salvage costs claims. Importantly, the judges noted a settlement had been reached between the government of SA and Argentum that has to be made public.

This settlement will spell out SA’s next steps, which could involve recovery of the $43m worth of silver. The government has yet to comment publicly, despite requests.