American Investors and Colombian Government Battle over $17 Billion Treasure Salvage

By Jack Harbeston, SSA managing director
Monday, April 15, 2013

A group of investors sued the Colombian government for preventing American salvage group Sea Search Armada from recovering San Jose, a ship that sank in 1708, often referred to as the “Holy Grail of Shipwrecks.” With numerous court rulings throughout the years, the battle has lasted since 1979.

In a case filed March 29 with the Inter-American Commission on Human Rights (IACHR), a group of American investors claimed the government of Colombia violated their human rights by preventing them from salvaging their jointly owned property, a Spanish galleon sunk in 800 feet of water near Cartagena, Colombia.

The investment group, named Sea Search Armada (SSA), brought the suit after more than 20 years of various legal efforts to affirm SSA’s initial agreement with Colombia. Jack Harbeston, SSA managing director since 1988, said that “Colombian courts have invariably ruled in favor of SSA (Constitutional Court, Administrative Court and Civil Court, including the Supreme Court) for more than 20 years. 

“However, the Presidents of Colombia have bitterly refused to implement the court rulings,” he said.  “In a true demonstration of hostility, they have threatened SSA with military force if it tried to salvage this galleon.  This is in spite of the ruling by the Colombian Supreme Court that we own 50% of the ship wreck and Colombian law that says we should have free access to it.  Such denial of access is detailed as a human rights violation to IACHR in SSA’s petition.”

Initially the U.S. group partnered with Colombia in a search for the San Jose, a Spanish ship laden with treasure which was sunk by British war ships in 1708 as it sailed from Portobello, Panama, toward Cartagena.  Spain and France were at war against England, Holland and other European nations, and the treasure on board, including two tons of platinum as well as gold from Peru, was intended to help Spanish ally Louis XIV of France pay for the war.

In 1979 SSA signed a search license agreement with the Colombian government that they would each own 50% of any shipwrecks found and SSA would have preferential rights to salvage its finds. SSA funded the search with an initial $10 million investment in hopes of finding the San Jose, often called the “Holy Grail of shipwrecks.”

After three years of archival research in Europe and an extensive deep water search financed exclusively by the Americans, SSA found what they believe to be the San Jose and, as part of their agreement, officially notified Colombia they had located the galleon.  At that time, the ship’s value was estimated to be between $3 billion and $10 billion.  Recent estimates of value exceed $17 billion.

Immediately after being advised of the ship’s location, the government of Colombia (GOC) changed the rules of its agreement with SSA.  It issued edicts and laws rescinding SSA’s 50% share while offering instead a five percent finder’s fee.  This was accompanied by a threat to cancel the agreement completely if SSA complained.   

SSA’s preferential right to salvage was also ignored.  The GOC negotiated a contract with a third party who later admitted to paying “commissions” to high level government officials.  A major scandal erupted when the Colombian Senate learned of secret meetings between representatives of the firm selected to salvage SSA’s property and the President of Colombia and his immediate staff.   In the glare of the scandal, that particular attempt to take all of the San Jose without payment unraveled.

However, the individual involved in that effort was appointed by President Uribe as an official on the Antiquities Commission.  The Commission has again introduced legislation aimed at taking the San Jose without compensating SSA as required by Colombian law.

In January 1989, following five years of rebuffed SSA attempts to settle with the GOC, the Americans filed suit in the 10th Civil Circuit Court in Barranquilla, Colombia.  In the years that followed, a succession of five Colombian presidents personally represented Colombia’s interests in Colombian courts—and lost in each instance. 

SSA’s Jack Harbeston said, “During 20 years of litigation, Colombia’s courts at every level and in every case ruled that SSA actions were consistent with the law, while the GOC actions were not. Colombian citizens can be proud of their courts, which were not only wise but courageous.  In one instance, a court went so far as to officially reprimand the office of the president for attempting to coerce a ruling from the judges that would uphold the GOC’s illegal actions.” 

By 2010 SSA had won all of its court cases in Colombia, but Presidents Uribe and Santos insisted they would not implement the law as interpreted by the Supreme Court, and if SSA tried to implement the law on its own, the Colombian armed forces would prevent it from doing so. With no wish to confront the GOC's armed forces, the only recourse remaining for SSA was to seek damages in U.S. courts for the losses incurred as a result of GOC illegal actions.

In December 2010 SSA filed a law suit in U.S. District Court to recover the funds it had lost because of the GOC’s intransigence. A year later the District Court dismissed the case on the grounds that too much time had passed between the GOC's illegal acts and SSA's filing of the lawsuit in the U.S. Then, on April 8, 2013, the U.S. Court of Appeals upheld the District Court dismissal. Immediately, the GOC heralded the District Court dismissal as a reversal of the Colombia Supreme Court decision, and that SSA had been stripped of its property rights by the U.S. District Court.

James DelSordo, SSA’s legal counsel in the case, said, “Nothing could be further from the truth. The outcome of this U.S. lawsuit in no way changes the rulings of Colombia’s Supreme Court, or SSA’s ownership of property and its preferential right to salvage what it found. The legal views circulated by the GOC are simply inconsistent with the facts."

In the meantime, Colombian officials are attempting to circumvent their legal system through their legislative system.  Harbeston said, “The leaders of this latest predatory attempt to take the San Jose are the same corrupt officials who in years past attempted to take SSA’s property by government fiat.  This time they are conspiring to pass a law designed solely to take over the San Jose.  Bill 125 now being debated in Colombia’s Congress really should be entitled “A License to Steal from American Investors.”  The bill has been before the Congress for more than a year. 

Among the bill’s opponents are a group of legislators who want to keep the San Jose entirely, not to benefit them financially but because they view it as Colombia’s patrimony.  Harbeston says he does not oppose Colombia keeping the whole ship, commenting, “If they want to keep the San Jose entirely as patrimony, I understand and appreciate their position and would welcome discussions with them that would lead to a fair and reasonable settlement for SSA’s property.”

He added, “SSA cannot legally deny them the legal process of eminent domain, whereby the government may take possession of private property.  The corollary for that law is that government must pay full market value for what it takes.”

“In fact,” he continued, “this is the basis for all of SSA’s legal efforts, first with the GOC, then with the U.S. court system and now with the Inter-American Commission on Human Rights: that certain GOC officials want to take our share of the San Jose and not pay for it. Other legal actions are being considered.  Aside from a false offer in 1984 that was almost immediately withdrawn, the GOC has never made an offer of any kind, express or implied.   It just keeps trying to take our property without paying for it, the most recent example being Bill 125.”

The IACHR must first decide if the SSA petition is admissible and qualifies under its rules as violations of human rights.  Once approved, a more detailed legal process will ensue.  The Commission is a judicial agency of the Organization of American States (OAS).  In filing the petition, Harbeston said, “SSA hopes to bring global attention to the GOC’s dishonest officials who willfully refuse to be ruled by their own laws.” 

The full petition filed with the IACHR was prepared by SSA’s lawyer in Colombia, Danilo Devis, who has represented SSA since 1988 and was responsible for the undefeated series of decisions by Colombian courts.  The petition extensively details SSA’s complaints.  Copies can be obtained from the Commission or from SSA. 
 

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