Amid the perilous egg-and-spoon race for seabed exploration, we don’t often get a chance to focus on a more traditional kind of hunting for precious metals on the seabed.
Associated with classic adventure novels and pirate films, and still attracting adventure seekers, it is the scouting for shipwrecks. So it was notable when in May this year a long running dispute over a haul of salvaged silver from 2,500 metres under the sea became a landmark case in the UK Supreme Court.* It did not go at all as the treasure hunter had hoped.
The hearing was an appeal in a claim over the recovery of 2,364 bars of silver from the wartime wreck of the SS Tilawa. The steam ocean cruiser, built by the British India Steam Company in the 1920s, was sailing form Mumbai (then Bombay) to Durban in 1942, carrying silver bullion purchased from India by the government of South Africa. The silver was destined for minting currency, most for the Union of South Africa and some for Egypt. As is was crossing the Indian Ocean, on 23 November 1942 the vessel was torpedoed by a Japanese Navy submarine and sunk, with the loss of 280 lives.
In 2017 a salvage venture Argentum Exploration secretly recovered the silver and took it to the UK to claim salvage rights, believing the silver to have been the property of the UK government. It brought the silver to Southampton and declared it to the Receiver of the Wreck, as per Merchant Shipping Act. The firm eventually conceded that the silver in fact had and continued to belong to the government of South Africa. In October 2019 it filed a claim in rem (i.e., a claim against property) for compensation for the salvage. Just over a year later it also filed an in personam claim against the South African government, but that claim had timed out.
South Africa challenged the jurisdiction of the English court, but ultimately proceeded to claim immunity in accordance with s.1(1) of the State Immunity Act 1978 (SIA) and/or Article 25 of the Salvage Convention — as incorporated into UK law by the Merchant Shipping Act 1995 (the MSA).
The case then went through High Count and the Court of Appeal, where in hinged on whether, when it sank, the salvaged silver had been “in use, or intended for use for commercial purposes”. Under section 10(4)(a) of the SIA a state is
not immune in “an action in rem against a cargo belonging to that State if both the cargo and the ship carrying it were, at the time when the cause of action arose, in use or intended for use for commercial purposes”.
The High Court judge and later the Court of Appeal by a majority decision agreed that the silver shipped by SS Tilawa was in commercial use, because it was bought under a FOB contract and shipped on a private vessel. The dissenting judge in the appeal disagreed, arguing that the silver was merely sitting in the hold and was not “in use” by the Government for either commercial or any purpose.
When the case ultimately reached it, the UK Supreme Court sided with the dissenting appeal judge — and with the South African Government. The ruling focused on the intended use of the silver, and determined that the silver was destined for the non-commercial, sovereign use of minting coins. The Supreme Court decided that the silver was not in use while being carried aboard the ship. It held that per Article 25 of the Salvage Convention: “the Silver was a non-commercial cargo owned by a state and entitled, at the time of salvage operations, to sovereign immunity under generally recognised principles of international law .”
The case made headlines in the UK largely because Argentum Exploration is owned by the hedge fund manager Paul Marshall, the founder of Marshall and Wace and the chief backer of the conservative TV channel GB News. Two months before the Supreme Court hearing Marshall injected £41 million to shore up GB News after it had made a £42.4mln loss the previous year. Against that background, a compensation for $43 million (£34 million) worth of salvaged silver might have made that venture seem something less of a sunk cost. But out of the spotlight of the media and the Supreme Court, the two sides in the silver dispute reached a confidential settlement on 26 April 2024, the value of which is not known.
Value aside, the case is a landmark for a number of reasons. As MMTA member HFW, which advised South Africa’s legal team, points out. First, the judgment has cleared up any ambiguity on the application of the SIA and Article 25 of the Salvage Convention, and on limitations on state immunity in international law and in rem cases in Admiralty law.
Second, as salvagers increasingly target shipwrecks, this case will serve as a warning. Aspiring treasure hunters will need promptly to find the owner of the original cargo and to make a contractual agreement with them to recover it.
And beware if the owner of the cargo is a sovereign state. If a state can show that it is the owner of the salvaged property and that this property had not been used or intended to be used for commercial purposes, then it is immune from an in rem cargo claim and entitled to get its property back. Although the UK Supreme Court case is not binding on other jurisdictions, other jurisdictions that rely on case law are now likely to take the same approach.
And this reassures governments as they move goods around the world that their commercially contracted cargo will not be irretrievably lost if it is involved in an incident. This is particularly relevant at a time when commercial vessels may be targeted by military action (e.g. as has been witnessed recently in the Red Sea).
As Jonathan Goulding, Senior Associate and Mariner, HFW comments, “governments around the world will be relieved that the court has decided that if the salvaged cargo in ques-tion was intended for state use, such as minting currency as in this case, it falls within the remit of state immunity and can be recovered by the state.”
Goulding concludes:
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”.
Separately, HFW points out, in the course of this case, the Court of Appeal held unanimously that the Merchant Ship-ping Act did not confer any power on the Receiver of the Wreck (ROW) to decide whether the salvage was due or to determine its amount. The ROW also is not required to continue to detain a wreck if a state successfully invokes state immunity in response to a claim for salvage.
Well, as they say, worse things happen at sea. By the MMTA *Argentum Exploration Ltd (Respondent) v Republic of South Africa (Appellant) Easter Term [2024] UKSC 16 On appeal from: [2022] EWCA Civ 1318
https://www.supremecourt.uk/cases/docs/uksc-2022-0162-judgment.pdf
HFW note https://www.hfw.com/app/uploads/2024/05/006010-HFW-UKSC-Finders-not-always-keepers-May-2024-1.pdf
