Merchant Shipping Act 1993 Defeats State Immunity

The well-established principle of state immunity was

re-examined in the context of the Marine Shipping Act 1993 when

the question arose of whether a governmental organisation

should pay its proportion of a salvage operation from which it

had benefited.

Salvage company, Tsavliris, carried out a successful salvage

pursuant to a Lloyd's Open Form (LOF) agreement signed by

both owners and cargo interests, the Grain Board of Iraq (GBI).

The agreement contained a London arbitration clause. A dispute

arose when GBI challenged the request for payment of their

proportion of cargo salvage on, among others, sovereign

immunity grounds.

The dispute was brought to the English court where the

claimant salvors argued: (1) that cargo owners were bound by

the London arbitration clause; (2) GBI were the owners of the

cargo; (3) GBI were liable for cargo's proportion of

salvage; and (4) GBI were a separate entity from the Ministry

of Trade of the Republic of Iraq. GBI, the defendant, contested

all the arguments and further claimed sovereign immunity.

Despite GBI's contentions, there was no doubt in Mr

Justice Gross' mind that GBI were the cargo owners and that

they were bound by the LOF. On the point of sovereign immunity,

the judge referred in particular to section 9 of the Merchant

Act 1993, which reads: "Where a State has agreed in

writing to submit a dispute which has arisen, or may arise, to

arbitration, the State is not immune as respects proceedings in

the Courts of the United Kingdom which relate to the

arbitration".

Furthermore, the...