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Court will decide who gets $500M haul

Odyssey Marine Exploration might have to give a half-billion dollars worth of gold and silver coins back to Spain because the treasure likely came from a Spanish warship and, if so, the vessel still belongs to Spain, according to a judge’s report.

All the evidence suggests the shipwreck, code-named Black Swan, is Nuestra Senora de Mercedes, a Spanish frigate that exploded and sank in an 1804 engagement with the British fleet, U.S. Magistrate Mark A. Pizzo writes in a June 3 advisory report for U.S. District Court in Tampa, Fla.

If that’s so, then the wreck is a Spanish war memorial — 250 Spanish sailors went down with Mercedes — and a part of Spain’s patrimony protected under U.S. and international law, he says.

Pizzo’s report, though not binding, says there’s enough evidence to conclude that the ship and treasure are Spain’s. Odyssey, which already has excavated 595,000 silver coins from Black Swan and warehoused them at a secret location in Florida, should return it all, he says.

“More than 200 years have passed since the Mercedes exploded,” Pizzo writes. “Her place of rest and all those who perished with her that fateful day remained undisturbed for the centuries — until recently. International law recognizes the solemnity of their memorial and Spain’s sovereign interests in preserving it.”

Odyssey’s exploration team found Black Swan in March 2007, about 100 miles east of the island of Gibraltar, 3,000 feet down in international waters.

Spain bases its claim on the U.S. Foreign Sovereign Immunities Act, which says property of foreign countries is immune from jurisdiction of U.S. courts. (Odyssey filed its claim to the Black Swan treasure with the U.S. District Court in Tampa.) That property includes sunken warships and military aircraft. They remain a nation’s property unless it expressly abandons them and says it no longer owns them. Pizzo says Mercedes remains on the Spanish Royal Navy’s registry of ships, so Spain has not abandoned the ship — or its treasure.

Most major maritime nations subscribe to the principle of sovereign immunity of their sunken warships, says Robert Neyland, director of the underwater archaeology branch of the U.S. Navy’s Naval History and Heritage Command. “The Geneva Convention talks about proper respect of war graves,” he says.

Naval shipwrecks that took sailors with them to the bottom are considered war graves. “Some nations do not want their warships interfered with or boarded at all,” Neyland says. Spain is among them. “War graves should be treated respectfully. The profit motive [as grounds for diving on a warship] is not very respectful.”

The United States has adopted the position that a sunken U.S. warship or aircraft remains United States property unless it is abandoned by an act of Congress.

History not for sale

Neyland was chief archaeologist and project director for recovery of the Confederate submarine H.L. Hunley and the bodies of eight sailors who went down with her in 1864 off Charleston, S.C. He says the decision to raise Hunley in 2000 was based in part on the desire to recover and bury the bodies of the dead, as well as to recover the submarine as an historical artifact and a national treasure.

“These ships — the older ones — are repositories of archaeological and historical information, and war graves, as well,” he says. They are not history for sale.

Odyssey has argued that though its leading hypothesis is that Black Swan is the Mercedes, it has found no definitive archaeological evidence to support that conclusion. In fact, it hasn’t even found the wreckage, though it has found coins, artifacts and cannons close to an area where Mercedes is believed to have sunk.

Pizzo, however, says the circumstantial evidence is sufficient to identify the wreck. “Even one of Odyssey’s experts concedes the ‘scattered debris field’ is ‘consistent with a vessel that has broken up at the surface [as Mercedes would have], descended through the water column, and spilled out the cargo and various components onto the seabed,” he says.

Odyssey has filed objections to Pizzo’s findings, arguing that he failed to acknowledge the absence of a vessel at the wreck site to attach the cargo to. It also says he misapplied the Foreign Sovereign Immunities Act, which exempts the commercial activities of foreign countries [italic “commercial activities of foreign countries”] from immunity. Odyssey says Pizzo failed to recognize that the Mercedes was on a commercial mission when the British warship sank it; that a “large majority” of its cargo, including the coins, was privately owned and not government merchandise; and that Pizzo failed to distinguish between the government-owned warship and its privately owned cargo.

Odyssey president Mark D. Gordon maintains that Spain and its attorney, James Goold, “rushed to judgment” in claiming Black Swan is the Mercedes. He says eyewitness accounts of the battle between Mercedes and the British fleet say it played out within view of land — Cape St. Mary, Portugal. Odyssey found the coinage out of sight of land, he says. Further, Gordon maintains, at the time it went down, Mercedes was not even operating as a warship. “It had been converted from military service to a cargo ship carrying [mostly] private goods from the New World back to Spain,” he says. “Seventy percent of its cargo was consigned by private interests.”

Secrecy alleged

The Black Swan case has drawn some 25 other litigants. One is Peru, which claims the treasure is its patrimony because the gold and silver was mined in Peru. Another claim has been filed by descendants of Spanish colonials whose private caches were aboard Mercedes. David Horan, the Key West attorney who won the 1982 Supreme Court case against the State of Florida that secured Mel Fisher’s claim to the fabulously lucrative Atocha treasure, is representing 12 of those families.

Horan believes there is legal precedent for the view that by leaving Mercedes on the bottom for more than 200 years without ever looking for it, Spain has abandoned the wreck and no longer has a claim of immunity for it.

“Once you’ve lost something and you don’t know where it is and you don’t go and look for it, you’ve lost dominion and control,” he says. “It’s not your property.”

If U.S. District Court in Tampa decides it has no jurisdiction over Mercedes, “then [the treasure] all goes into the Spanish general fund,” Horan says. “The people who found it, the people who have claims on it — none of them will get a penny.”

Relations between Spain and Odyssey have become rather bitter. The Spanish claim Odyssey knew that Spain had made a public declaration in the Feb. 5, 2004, U.S. Federal Register that it has not abandoned any of its sunken warships or their contents, and that treasure hunters are prohibited from disturbing those wreck sites. It also says that two years later Odyssey, after acknowledging that Spain has more sunken ships than just about any other country in the world and must protect its wrecks from “looters,” asked for Spain’s consent to recover and sell artifacts from Spanish wrecks, a request that Spain forcefully denied because “artifacts from archaeological excavations and from underwater cultural heritage are for public benefit and not for public sale.”

Spain charges that Odyssey secretly excavated the Black Swan site so it couldn’t stop the operation and in April and May chartered two airliners to quietly whisk 500,000 gold and silver coins out of Gibraltar to an undisclosed location in Florida. “In sum, Odyssey violated the protections and immunities that the warship Mercedes is entitled to under U.S. and international law when it took artifacts from the Mercedes without Spain’s authorization,” Spain’s court complaint reads. “Indeed, Odyssey disturbed the Mercedes after Spain expressly refused authorization or consent to conduct salvage operations.”

Relations between Spain and Odyssey had deteriorated so badly that last year Spain seized two of Odyssey’s survey vessels off Gibraltar, arrested one of its captains, and confiscated a computer. The vessels and captain both were released, but Spain still is not permitting Odyssey to get on with its work on the excavation of a treasure-laden British vessel, HMS Sussex, off Gibraltar.

A negotiation policy

Gordon says Odyssey tries to avert this kind of unpleasantness, and the extended and risky court battles, by negotiating agreements beforehand with nations that may have a claim on a wreck. Odyssey has negotiated an agreement with the government of Great Britain to excavate HMS Sussex, a British frigate believed to have $500 million worth of gold aboard. As owner of the wreck, the British government will get any historically significant artifacts. The two will split the overall value of the cargo — 80 percent to Odyssey and 20 percent to the government for the first $45 million, a 50-50 split of the value of the remaining artifacts up to $500 million, and a 60-40 split, the bigger share going to Odyssey, for anything over that. Odyssey is seeking a similar agreement with Great Britain for excavation of HMS Victory, which may contain $1 billion in gold.

However, Spain — which probably has more treasure-laden ships on the bottom than any other country — has refused to do business with Odyssey. “It’s only Spain that we have this issue with,” Gordon says. Its minister of culture, Angeles Gonzalez-Sine, is “positively against Odyssey and people like Odyssey,” he says.

See related article:

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This article originally appeared in the November 2009 issue.