Commercial Disputes Weekly – Issue 20514 May 2024

Maritime – Sovereign Immunity
The Supreme Court has held that the Republic of South Africa is entitled to assert sovereign immunity in relation to a claim in rem against a cargo of silver belonging to South Africa. The cargo was on board a ship that was sunk in 1942 due to enemy action. It was salvaged in 2017 and the salvors brought a claim in rem for the salvage costs against the silver. The Supreme Court overturned the decision of the Court of Appeal and held that the exception to sovereign immunity in section 10(4) of the State Immunity Act 1978 where the cargo was in use for commercial purposes did not apply. The silver was being carried to South Africa to be minted into coins. To say it was in use at the time did not accord with the ordinary and natural meaning of the words. Cargo that is sitting in the hold of a ship was not in use for any purpose. The Court of Appeal had made an error in focussing on the intended use of the cargo. A high threshold for removal of the immunity was appropriate given the intrusive nature of in rem claims and the secured creditor status they give to the claimant.
Argentum Exploration Ltd v Republic of South Africa [2024] UKSC 16, 8 May 2024

Property – Nuisance
The Supreme Court has refused a claim for damages for diminution in the value of land due to Japanese knotweed that had encroached from neighbouring land. The claimant bought the land in 2004 and by then knotweed had already encroached from the neighbouring land owned by Bridgend County Borough Council. Encroachment of knotweed was not an actionable private nuisance until 2013. The defendant council did not implement an effective treatment programme until 2018. The lower courts held that the council was in breach between 2013 and 2018, but there was disagreement as to whether damages were recoverable. The Supreme Court allowed the appeal from the Court of Appeal and concluded that the council’s breach between 2013 and 2018 had not caused or materially contributed to any diminution in value in the land. The diminution in value had occurred long before any breach of the duty in 2013.
Davies v Bridgend County Borough Council [2024] UKSC 15, 8 May 2024

Commodities – GAFTA
The Supreme Court has given judgment on the measure of damages for non-payment default under a GAFTA Sale Contract No. 24. The cargo of peas and lentils arrived at the discharge port of Mundra, India, but the buyers had not paid for the goods and the sellers ended up reselling the goods to an associated company. After shipment the government of India had imposed a significant import tariff on peas and lentils. In reaching its conclusion and allowing the sellers’ appeal, the Supreme Court held that the Court of Appeal had erroneously decided a question based on an inference as to certain facts and a conclusion that the contracts had been varied. That issue had not been before the GAFTA Appeal Board and so the Court of Appeal could not introduce the issue at appeal stage. The Supreme Court also allowed the buyers’ cross appeal.The proper approach for assessment of damages was to be guided by the mitigation principle and consider the market where it would be reasonable for the sellers to resell the cargo. Given the increased price due to the import tariffs, the appropriate market was an ex warehouse Mundra sale, not the FOB Vancouver market (from which the goods had been shipped).
Sharp Corp Ltd v Viterra BV (previously known as Glencore Agriculture BV) [2024] UKSC 14, 8 May 2024

ESG – Net Zero
In July 2022, the Secretary of State for Business, Energy and Industrial Strategy (“SOS”) was held to have failed to comply with duties to prepare proposals and policies for achieving carbon budgets. The SOS was ordered to provide a further report by March 2023. In this latest judgment, the Administrative Court has found that the further report was not compliant on four out of five grounds. These included failing to take into account mandatory material considerations, proceeding on the basis of an unsupported assumption that all of the quantified proposals and policies would be delivered in full and the conclusion that the proposals and policies will enable the carbon budgets to be met being irrational. The SOS had also applied the wrong legal test to section 13(3) of the Climate Change Act 2008.
Friends of the Earth and others v Secretary of State for Energy, Security and NetZero [2024] EWHC 995 (Admin), 3 May 2024

Insurance – Indemnity
The Court of Appeal has confirmed that an exclusion clause in standard offshore construction all risks insurance policy wording excluded claims for damage to any property owned by any of the “Principal Assureds”. The exclusion was in the WELCAR 2001 Offshore Construction Project Policy wording, which defined “Principal Insureds” but not “Principal Assureds”. The court held however, that it was to be interpreted as referring to property owned by any of the Principal Insureds (as defined). This included Technip who was contracted to perform construction works on offshore assets in the Khafji field in Saudi Arabia, as well as the joint venture operator, KJO. A vessel chartered by Technip allided with an unmanned well head platform. It was obliged to pay US$25m in compensation to KJO but was unsuccessful in recovering it under the project insurance, due to the exclusion.
Technip Saudi Arabia Limited v The Mediterranean & Gulf Insurance and Reinsurance Co [2024] EWCA Civ 481, 9 May 2024

Should you wish to discuss any of these cases in further detail, please speak with a member of our London dispute resolution team below, or your regular contact at Watson Farley & Williams: