The case before the Supreme Court concerned an appeal by the Republic of South Africa from the decision of the Court of Appeal (upholding the first instance decision of Sir Nigel Teare in the Admiralty Court) who considered that the cargo of silver was " in use or intended for use for commercial purposes" at the time of the sinking as it was (a) being transported pursuant to a commercial contract of carriage and (b) it had been purchased by the then Union of South Africa under a commercial sale contract.

The Republic of South Africa argued that the Court of Appeal was wrong in its majority judgment and that the cargo of silver was not "in use" by the Union of South Africa for any purpose at the time of the sinking – it was "intended for use" but under a non-commercial purpose – i.e. being made into coin for the South African Mint (which was the dissenting judgment of Elisabeth Laing LJ in the Court of Appeal), therefore s10(4)(a) of the SIA did not apply and the Republic was entitled to claim state immunity under s1(1) of the SIA.

The Supreme Court conducted a detailed analysis of the provisions of the SIA and the concept of state immunity both generally in public international law and more specifically in relation to in rem proceedings in the Admiralty Court. The distinction generally considered in relation to the application of state immunity being whether the act in question can be characterised as being private or public/sovereign in nature.

The Court considered the historical development of state immunity – evolving from an almost total immunity (in particular in relation to in rem actions), which did not distinguish between sovereign and non-sovereign acts to situation where there were certain exceptions where a state was carrying out commercial, non-sovereign activities.

The Supreme Court over-turned the decisions of the lower courts, instead construing s10 of the SIA as a "hybrid provision", which it said was specifically related to "immunity from both adjudicative and enforcement jurisdiction in Admiralty proceedings.".

The Court commented that there were " compelling reasons why more stringent criteria should be satisfied before immunity is denied in the case of actions in rem". Actions in rem are more invasive towards the rights of a state over its property than in personam claims.

The Supreme Court accordingly permitted the Republic of South Africa's appeal, concluding that the exception in s10(4)(a) did not apply as the cargo of silver was not "in use or intended for use for commercial purposes" at the time the SS TILAWA sank – its intended use was for a sovereign purpose.

An additional point that arose in interpreting s10(4)(a) of the SIA was in relation to the requirement that the status of the cargo be considered "at the time when the cause of action arose". The cause of action did not technically arise until the cargo was salved in 2017, at which point it was difficult to determine what the "use"/"intended use" was. The Supreme Court said that in interpreting this part of s10(4)(a) in this particular case it was appropriate to consider the status of the cargo at the time of the sinking.

The Supreme Court said they also considered this conclusion aligned with Article 25 of the Salvage Convention as the silver was, they said, "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 intended use of the cargo was for sovereign purposes and therefore the granting of state immunity from the in rem action conformed with the required principles of public international law.

Interestingly, the judgment also indicates that the parties had settled the case outside of proceedings before the judgment was handed down by the Supreme Court. However, the parties and the Court were agreed that the judgment should nonetheless be handed down.

Commentary

The judgment in the SS TILAWA is significant because there have not been any previous judgments covering s10(4)(a) of the SIA. It is also of note because of the detailed consideration by the Court of state immunity and public international law.

It highlights the importance given by the courts to state immunity and their reluctance to erode or deny such immunity – in particular in relation to in rem actions. There had been some criticism of the decisions in the lower courts that they eroded the fundamental protections of state immunity.