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 judge held that the act of entry into the LOF by GBI was not a governmental act and consequently GBI were not entitled to rely on the immunity available under the 1993 Act. GBI's challenge failed.
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