An Economic Solution to Complex Treasure Cases

As marine technology has improved, it has afforded treasure hunters the opportunity to locate and recover more of the forgotten wrecks of the past. Unfortunately for them, this has also meant increased litigation as the sovereign nations who can lay claim to their sunken assets have attempted to do some recovery work of their own. In the latest example of this type of suit, successive Florida judges have ruled that Nasdaq-listed Odyssey Marine is required to return nearly 17 tons of silver coins from the ship codenamed 'Black Swan' to the Spanish government. No word on whether the explorers are fans of Thom Yorke, World War II history, or esoteric mathematics theories, but the Spanish claim that the ship is in fact Nuestra Senora de las Mercedes, a frigate which was lost off of the Strait of Gibralter to the British around the turn of the 19th century.

The next step for the case is the federal circuit, where Odyssey's claim will be heard. The following can be found on Odyssey's website, and reflects optimism on the part of CEO Greg Stemm,

“We are moving ahead with our other current projects – and it is important for people to understand that the vast majority of our shipwreck projects don’t have the same potential legal issues that have surfaced in the “Black Swan” case. Our focus for 2010 is on projects that are either under specific permits with governments or commercial vessels. We take heart from cases like the shipwreck of the Atocha, which seemed lost at the district court level but was won during the appeals process, granting the salvor the majority of the coins and artifacts from that shipwreck. The Central America shipwreck case was also reversed on appeal and the salvor’s position in the case of the RMS Titanic was substantially vindicated by the Fourth Circuit court of appeals in 2006, so the three most famous shipwreck cases to date were reversed on appeal. ”

And the following comes from Melinda MacConnel, Odyssey Vice President and General Counsel,

“We do not believe the Magistrate applied the correct legal analysis to the discussion of commercial activity, so we look forward to presenting our case that even if the coins recovered were once part of the cargo of the Mercedes, that ship was not entitled to the sovereign immunity enjoyed by warships on strictly military service under U.S. law and policy as well as under applicable international law...The Mercedes was serving a well-documented commercial - not military - purpose when she sank.The Foreign Sovereign Immunities Act only applies to sovereign governments and their property and has been misapplied by this court.”

For their part, Spain, as well as Peru, a Spanish colony at the time, are claiming that the treasure from the wreck is part of their shared cultural heritage, and therefore should be protected by law and treaties, including the UNESCO 2001 Convention on the Protection of Underwater Cultural Heritage.

There will undoubtedly be numerous legal theories, treaties, and previous rulings that will impact the final outcome of this case. However, putting aside what could happen based on maritime law, there is a very logical economic solution to the problem that would result in positive externalities and favorable results for all involved. Though it would clearly have been better for Odyssey to collaborate with the Spanish and come to agreements ex-ante, allowing for cultural exploration, sharing of profit, and reduction in legal risk and fees, the situation is unfortunately past that point. Therefore, until sovereign nations start to take on salvaging operations themselves, the most sensible thing to do in cases such as this that only arise ex-post is for courts to rule for the finders of treasure.

This does not mean that nations would lose their heritage. On the contrary, it would incentivize settlement deals where the salvor's legal leverage will allow it to bargain with the claimant nations, and lead to sovereigns obtaining cultural artifacts. After all, companies such as Odyssey are for-profit, and in Odyssey's case are publicly traded with shareholders to answer to. Its ultimate goal is not to display silver coins in the lobby of its headquarters, but to turn profit. Therefore it would likely be more than happy to sell its findings to the Spanish government at market price.

This profit motive, combined with the potential power of legal backing, would in turn incentivize further exploration and risk taking and ensure that the treasures that remain hidden in the unexplored corners of the oceans do not go forever unfound. Ultimately, this would allow for the most recovery while allowing nations to retain their cultural history, albeit at a fair price.

This case has been reported as: Odyssey Marine Exploration Inc. v. The Unidentified Shipwrecked Vessel, 07-cv-614, U.S. District Court, Middle District of Florida (Tampa).