The events leading up to the discovery of Sir John Franklin's second ship in Nunavut waters are being investigated by the territorial and federal governments to determine if the search was conducted legally.

The Arctic Research Foundation discovered HMS Terror, the second, long-lost ship in the doomed Franklin expedition in the 1840s, at the bottom of Terror Bay by in early September.

But Nunavut's government says the foundation — a private non-profit created by Jim Balsillie, former chairman of BlackBerry-maker Research in Motion — didn't have the permits to look for the ship.

A violation of Nunavut's archeological regulations can carry a summary conviction with either a fine or imprisonment.

"The Department of Justice is working with the Public Prosecution Service of Canada to review the events leading up to the discovery of HMS Terror," reads an email from Nunavut's Justice Department.

"Until that review process is complete, we cannot comment further."

Unexpected discovery

Video shared with CBC News and produced by the Arctic Research Foundation appears to show images of the sunken HMS Terror, one of Sir John Franklin's two ships lost in the doomed 1845 Franklin Expedition, in a Nunavut bay. 5:49 HMS Terror was discovered in "pristine condition" Sept. 3 at the bottom of a bay that bears its name off the south shore of King William Island.

Acting on a tip from Sammy Kogvik from Gjoa Haven, Nunavut, the foundation sailed to Terror Bay on board its research vessel Martin Bergmann. At the same time, Parks Canada staff were searching Victoria Strait.

"The Arctic Research Foundation did not have a permit from the Government of Nunavut to conduct a search in Terror Bay, or in any other location," wrote Doug Stenton, Nunavut's director of heritage, in an email.

The Martin Bergmann was conducting scientific research in the Queen Maud Gulf when Sammy Kogvik shared his story about coming across the mast of what he thought was a ship years earlier. (CBC) However, a permit allowing sonar searches in Victoria Strait had been issued to a senior underwater archeologist with Parks Canada, said Stenton, an area he confirmed does not include Terror Bay.

"It is my understanding that the Arctic Research Foundation's involvement in the Franklin project since 2012 falls under an agreement between the Foundation and Parks Canada.

"As such, field activities conducted by the Arctic Research Foundation are assigned by Parks Canada in consultation with the Foundation, and are governed by the permit issued to Parks Canada," said Stenton.

Parks Canada has not yet responded to interview requests.

Strained relations

A letter dated Oct. 4 from Linda Pieterson with the law firm Ricketts Harris LLP to Stenton shows a rift between the foundation and Parks Canada.

"ARF acknowledges that its relationship with Parks Canada is strained and not functioning like it did in prior years," writes Pieterson.

Parks Canada's underwater archeology team prepares to enter the water on the HMS Erebus dive from 2014, while being supported by the Arctic Research Foundation's vessel, Martin Bergmann. (Dan Bard/Department of National Defence) "With respect to the Parks Canada Permits, ARF did not receive copies of permits issued in respect of the work to take place in 2016.

"If a change was made to the Parks Canada Permits that narrowed their ambit in 2016, such a change was done without ARF's knowledge.

"If ARF in any way acted offside the regulations, it did so innocently and without harm."

Eight-day delay

The letter in part explained why there was an eight-day delay in informing the federal government about the finding.

Unlike HMS Erebus, the letter indicates there was no notification protocol in place. The letter says the foundation attempted to finalize a communication strategy with Parks Canada in the spring of 2016 but received no response.

According to the letter, on the day of the discovery, the Martin Bergmann was conducting scientific research in the Queen Maud Gulf when Kogvik shared his story about coming across the mast of what he thought was a ship years earlier.

A still from a video produced by the Arctic Research Foundation appears to show the wheel of HMS Terror. An Arctic Research Foundation spokesperson says the crew of the research vessel Martin Bergmann found the long-lost ship in a Nunavut bay on Sept. 3. (Arctic Research Foundation) The crew travelled to the site and detected a shipwreck using sonar, then sent in an underwater camera. Once the photos were uploaded back in Cambridge Bay, the foundation informed the Prime Minister's Office.

As the crew of the Bergmann threw a community feast in Gjoa Haven to celebrate the finding of the ship, staff from Parks Canada had to reorganize and wait for bad weather to pass before they could head out from Victoria Strait to Terror Bay.

"Unfortunately, rather than this being treated as fantastic news for all partners, celebrated and shared by all, the discovery of HMS Terror has been tainted by negative, and unfounded, statements made in respect of ARF," writes Pieterson.

'Outside of the spirit of partnership and cooperation'

Lawyers for the foundation say the organization will co-operate with any investigation. But Pieterson's letter indicates they're not particularly happy about it.

"Recent statements made to the media have forced ARF to struggle with whether certain motivations have been generated outside of the spirit of partnership and cooperation. These statements began immediately after ARF volunteered to provide all of its information to the Government of Nunavut — before government officials had even inspected the ship," writes Pieterson.

"Regrettably, ARF has been left to conclude that there may be an agenda in play focused on discrediting ARF, its people and its work."