Precious Metals

The odyssey of Odyssey

The latest episode in the treasure salvage case involving Odyssey Marine Exploration and the government of Spain occurred on Sept. 21. The 11th Circuit Court of Appeals affirmed a district court judgment requiring Odyssey to turn over hundreds of silver coins and other items to Spain.

The court’s decision appears to concern only whether there was jurisdiction to decide a case against Spain under the federal Foreign Sovereign Immunities Act, which makes foreign countries immune from suit in the United States. The court affirmed the district court’s determination that the FSIA barred jurisdiction.

Affirmed findings

First, the appeals court noted that it would affirm the district court’s factual findings unless they were “clearly erroneous,” which the court characterized as something less than “the well-known sports rule, ‘the referee is always right,’ ” but nevertheless a “formidable challenge” for appellants.

Second, the court held that the district judge was entitled to make an independent determination of facts rather than resolve all factual disputes in Odyssey Marine’s favor. Odyssey had argued that jurisdiction under the FSIA was intertwined with its substantive legal claims to the property, but the court found that the FSIA was strictly jurisdictional, and the district judge was correct in weighing all the evidence rather than taking Odyssey’s allegations as true.

Third, the appeals court determined that the district judge did not abuse his discretion in deciding the matter without an evidentiary hearing where Odyssey’s attorneys could have cross-examined Spain’s expert witnesses. The court agreed that the district judge had before him “an encyclopedic treatment of the issues,” including 125 affidavits, counter-affidavits, original historical records with translations and detailed photographs.

Fourth, the court found that the FSIA granted Spain immunity from suit. This, in turn, involved several findings. The most important was that the district judge was justified in his conclusion that the vessel being salvaged was the Mercedes, a Spanish navy frigate that exploded and sank in 1804.

Inconsistencies rejected

The court rejected various inconsistencies raised by Odyssey between the wreck and existing records concerning the Mercedes’ cargo and circumstances of sinking, and agreed with the district judge that the vessel was, in fact, the Mercedes. The court found no exceptions applied that might strip Spain of its FSIA immunities.

Odyssey had raised the “commercial activity” exception, based on the fact that 75 percent of its cargo was privately owned, merchants were charged a fee for shipping aboard it and Spain was not at war at the time. The court emphasized that the Mercedes was crewed by Spanish naval personnel, and that at the time it was a normal military — not commercial — function for navy ships to provide protection and safe passage for private Spanish merchants through “hostile” seas.

Fifth, the court addressed the concerns of Odyssey and various property claimants that even if the Mercedes itself was immune from claim, the private cargo (including the coins) could be claimed.

Citing a treaty between the U.S. and Spain guaranteeing Spanish vessels the same treatment as U.S. vessels and a federal law treating cargo of U.S. military vessels as part and parcel of the vessel itself, the court concluded that the district judge correctly included the cargo as well as the vessel in its immunity grant.

The court agreed with the district court that the proper result of all this was not to return the property back to Odyssey. The property should be given to Spain because its interest predated Odyssey, and because it would be an “affront” to Spain to do otherwise, particularly given the court’s determination that it had no jurisdiction on Spain.

Armen R. Vartian is an attorney and author of  A Legal Guide to Buying and Selling Art and Collectibles.

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