KEY POINTS:
On October 5, 1804, a flotilla of four treasure-laden Spanish frigates, homeward bound from Latin America, was intercepted by an equal number of British frigates off the Portuguese coast.
Although Spain was neutral, the British knew of a secret alliance with Napoleon, and intended to seize the bullion. The British ships closed with the Spanish, taking the Fama, Clara and Medea after a brisk action. But in a catastrophic blast the Nuestra Seora de las Mercedes went to the bottom when its magazine exploded.
Now in a closely-watched case being heard in Tampa, Florida, the Mercedes has re-emerged as Spain battles US salvage company Odyssey Marine Exploration, which is said to have found the wreck and its contents, over ownership of the frigate's cargo. It is valued by some media estimates at a record US$500 million ($636 million).
The case dates to May 2007, when Odyssey announced it had found a "colonial-era shipwreck in an undisclosed location in the Atlantic Ocean."
Code-named the "Black Swan" - a manoeuvre that obscured the ship's identity and drummed up publicity - Odyssey said the wreck has yielded 500,000 silver coins, several hundred gold ones and artefacts. The haul, flown to the US on chartered jets early last year, is officially valued at $3.99 million.
This figure quickly leapt to $500 million in media reports.
The treasure hunters found themselves assailed by critics. The company is accused of hyping the wreck's value to beat up its stock price and cash in, and also of vandalising a historical site and grave for 200 sailors.
And in a case involving colonial-era booty, both Odyssey and Spain are accused of robbing cultural patrimony.
Odyssey said the wreck lay "beyond the territorial waters" of any nation. Suspecting the salvagers may have desecrated a historical site, in May 2007 Spain laid legal claim to the treasure. Salvage efforts halted when Spanish gunboats, during a month's long cat-and-mouse game, ordered Odyssey vessels into Algeciras to be searched.
Attention then shifted to the US District Court in Tampa. Spain identified three ships as tentative Black Swans: the Merchant Royal, an English ship laden with Spanish bullion that floundered in 1641 off Cornwall; a liner sunk by a U-boat off Sardinia in 1915, but later identified as the Ancona, an Italian vessel; and the Mercedes.
In March, after persistent pressure from Spain to reveal the Black Swan's identity, Odyssey - which insisted it had to hide the wreck from looters - told the court "one vessel Odyssey has considered which may be related to the site is the Nuestra Senora de las Mercedes y las Animas, a Spanish vessel which had been assigned to transport mail, private passengers and consignments of merchant goods and other cargoes at the time of its sinking in 1804."
This is a masterly piece of understatement, scoffed at by James Goold, a Washington-based lawyer who represents Spain, as Odyssey's "working hypothesis".
Spain says salvaged items, inspected in a Florida warehouse sealed by the court, prove the wreck is the Mercedes.
"We know its exact location," says Goold. "We're not revealing it."
Identifying a wreck's identity is critical in deciding ownership. While salvagers can claim a percentage of a commercial wreck's worth if ownership is known, or everything if it is not, warships, sunk or afloat, remain the property of the state under whose flag they sailed.
"The same principles and rules would apply if it was a New Zealand navy ship," says Goold, who won Spain's claim to the frigates La Galga and Juno, which sunk off the US eastern seaboard in 1750 and in 1802, respectively, before a US court in 2000.
"If someone disturbed it or took materials from a sunken New Zealand navy ship without authorisation of the New Zealand navy and government they would presumably not be entitled to any compensation whatsoever. And they would be in serious legal trouble."
Odyssey, which suggested the Mercedes was on a non-military mission, has tried to salvage a deteriorating legal situation by suggesting that it might be entitled to some sort of finder's fee. "It is the opinion of our legal counsel that even if a claim is deemed to be legitimate by the courts, Odyssey should still receive title to a significant majority of the recovered goods," Natja Igney, Odyssey's public relations manager, said in March.
This may be wishful thinking. "I have no reason to expect any kind of settlement," says Goold. "Odyssey has made recent statements suggesting they would like to receive some kind of reward. And the Spanish position is clearly stated. Violations of law are not to be rewarded."
MODERN treasure hunting is a high-risk business, far from the low-tech era of scuba divers. Odyssey, which was started in 1994, uses private capital and is traded on the US Stock Exchange and the NASDAQ. In 2005 and 2006 the company reported net losses of $14.9 million and $19.1 million respectively. But this can change with one strike. When the Black Swan was announced, Odyssey shares soared over 80 per cent to $8.32. Greg Stemm, a former advertising executive who co-founded the company with real estate magnate John Morris, says his business plan is simple: "Billions of dollars of shipwrecked cargo are lost in the deep ocean, and technology exists to find and recover it."
That may be true. But fortunes can be made without plunging to the bottom of the sea; shares in treasure hunting stock have seen wild trading.
In 2003 Odyssey salvaged the SS Republic, a US paddle steamer that sank in 1865 and yielded $75 million. In 2002 it claimed to have found HMS Sussex, a British warship that sank in 1694, reputedly taking 10 tonnes of gold coins intended as a bribe to entice the Duke of Savoy to side with Britain against France. A front-page New York Times story said the horde might "be worth up to $4 billion". Odyssey's stock soared overnight, from $0.90 to $1.93.
This rosy scenario had detractors. In April the New Yorker reported that History Hunters International, a website run by three British sceptics, had questioned the wreck's true identity and suggested that the Royal Navy's entire budget in 1694 was smaller than the Sussex's supposed cargo.
To salvage the Sussex, Odyssey cut a controversial deal with the British Government. While Britain retains ownership of the wreck, and both sides will market recovered artefacts, Odyssey gets a percentage, on a sliding scale, of the salvage, plus exclusive marketing rights to the Sussex name in return for royalties. But by harassing Odyssey vessels near Gibraltar, Madrid has challenged UK claims to territorial waters off the British overseas territory.
"There is the potential here for a serious diplomatic incident," Mike Williams, a heritage law academic, told the London Times. "The British may be obliged to act. It is all very embarrassing to them."
In Spain the Mercedes affair has become a matter of national honour, with treasure hunters pilloried by the local press as "the new pirates of this century". Less attention has been paid to another claimant: the people from whom Spain stole gold and silver to mint its coins.
Campaigners in Peru want this looted treasure, extracted in brutal conditions by enslaved Indians, back. "If we can establish that recovered artefacts came from Peru, we are ready to reclaim them as material remnants of our past," Blanca Alva Guerrero, Peru's chief of cultural patrimony told the Guardian.
Although Peru didn't exist in 1804, they are several precedents for such a move, including the restoration of Greek and Roman antiquities to Greece and Italy from the Getty and other US museums, and of Inca artefacts, looted from Machu Picchu, from Yale University to Peru.
Goold says Peru has not filed legal claim to the Mercedes' cargo. Finally, there's the 2001 UNESCO Convention on Protection of Underwater Cultural Heritage, which bans the commercial exploitation of wrecks. It is unlikely to have much heft in Tampa [neither the US nor the UK has signed], but provides moral weight to nations fearful for their patrimony and archaeologists battling treasure hunters.
Odyssey says it handles wrecks with kid gloves. As it is highly secretive, and wrecks lie at tremendous depths, this is hard to ascertain. Salvage companies build databases, culled by historians, of likely targets, then sweep the ocean with side sonar and magnetometers, before deploying remote operated vehicles [ROV] that use strobes, video and robotic arms equipped with suckers to salvage the wrecks.
But what really riles archaeologists is the Sussex deal, which they liken to letting a fox in with the chickens. The Council for British Archaeology worries poorer nations will be pressured into selling artefacts, and that Britain will lose its moral authority in fighting illegal antiquities trade sometimes linked to organised crime.
Meanwhile, doubts have emerged about the Mercedes' true value. Will the haul fetch $500 million or does the $3.99 million declared to UK Customs in Gibraltar represent its real worth? The London Times reported stock sales by Odyssey directors under a teasing headline: "Sunken Treasure Overvalued to Lift Shares of Salvage Firm'."
Back in Tampa, Goold is circumspect when asked if the case will be resolved soon. "We expect now that the mystery this company sought to create has been dispelled, legal activity will accelerate and intensify," he says.
And for Odyssey it is a high-stakes gamble that may sink the Black Swan.
SEA BOUNTY
* US$450 million Value of treasure recovered from the Nuestra Seora de Atocha, which sank off the Florida Keys in 1622. Treasure hunter Mel Fisher won title after years of litigation.
* US$1 billion Amount at stake in court battle between Colombia and salvage company Sea Search Armada for riches lying on the Caribbean seabed off Cartagena.
* 3 million wrecks lie on the ocean floor, according to UNESCO. For treasure hunters the Caribbean and the Iberian coasts are the happy hunting grounds.
* 800 colonial-era shipwrecks, plus Phoenician and Roman vessels, lie off the Spanish port of Cadiz, the landfall for ships from America. Another 150 ships sank off southern Portugal. Their total value is estimated at US$1.5 billion.
