The Ministry of Defence is facing a legal battle and parliamentary questions after letting a US company excavate a British 18th-century warship laden with a potentially lucrative cargo.

Lord Renfrew is among leading archaeologists condemning a financial deal struck over HMS Victory, considered the world's mightiest ship when she sank in a storm in the English Channel in 1744.

In return for excavating the vessel's historic remains, which may include gold and silver worth many millions of pounds, Odyssey Marine Exploration is entitled to receive "a percentage of the recovered artefacts' fair value" or "artefacts in lieu of cash".

Lord Renfrew, a Cambridge academic, said: "That is against the Unesco convention, in particular against the annexe, which states that underwater cultural heritage may not be sold off or exploited for commercial gain.

"Odyssey is a commercial salvager. It's not clear that payment could be obtained other than by the sale of the artefacts which are raised – which, of course, is how Odyssey has operated in the past. To raise artefacts simply for sale would be regarded by most responsible archaeologists as plundering."

Two bronze guns have already been recovered from the wreck and sold to the National Museum of the Royal Navy for £50,000, funded out of the MoD's grant. Lord Renfrew said: "It sounds as if a national museum was paying for cannons which are already owned by the nation."

Unesco also states that the gifting of a wreck requires those undertaking archaeological work to have adequate resources. The archaeologists accuse the MoD of dereliction of duty in passing responsibility for this historic wreck to the Maritime Heritage Foundation (MHF), a charitable trust "which appears to have no financial, archaeological or management resources" while embarking on a project "that will cost millions". They complain that MHF entered into a contract with Odyssey, "a listed US business seeking a financial return for its shareholders" which "relies on selling artefacts… to finance archaeological work". Ironically, the MoD originally rejected Odyssey's direct offer to excavate.

The archaeologists' concern is the more acute having learned that a second historic wreck, HMS Gloucester, a frigate from which the future King James II was rescued when it sank in 1682, is being considered for transfer to the MHF.

HMS Victory, the predecessor to Nelson's Victory, was a 100-gun flagship of the Royal Navy. Over 1,000 lives were lost when it went down. Precisely what lies on the seabed is unknown, but cannons have been spotted.

Odyssey specialises in deep-ocean exploration using state-of-the-art technology. Its discoveries include a Civil War shipwreck, from which it recovered over 50,000 coins and 14,000 artefacts. Its plans for HMS Victory include "recording, documentation, conservation, publication and public education".

But archaeologists are determined to halt the excavation and are taking advice from maritime lawyers. The issue was raised last week by the All-party Parliamentary Archaeology Group (APPAG), chaired by Lord Renfrew, who will raise questions in parliament.

He said: "It's difficult to understand why the MoD apparently gifted the wreck of HMS Victory to this rather obscure trust, the MHF. It's not clear how it will fund the appropriate salvage of the wreck."

Mike Heyworth, director of the Council for British Archaeology, said the procedure raises "questions about the lack of transparency involved".

Opposition to the agreement is being mounted by a heritage campaign, the Joint Nautical Archaeology Policy Committee. Its chairman, Robert Yorke, said: "This will provide a worldwide precedent for treasure hunters to finance excavation of historic wrecks by de-accessioning and selling artefacts."

Yorke accused Odyssey of salvaging "without the Spanish government's permission", tonnes of silver and gold coins from a Spanish frigate, the Mercedes, sunk by the British in 1804, although Spain pursued them through the US courts to retrieve the cargo and won. The coins were recently returned to Spain.

He added: "You're basically starting an archaeological excavation knowing that you'll sell the artefacts off to finance it. On a land excavation, there would be an outcry."

JNAPC's report states that MHF relies wholly on the resources of Odyssey "who have a clear conflict of interest".

The archaeologists are demanding to know why the MoD did not offer the Victory wreck to established marine archaeological organisations and charities, challenging the MoD claim that MHF was the only charity to offer assistance.

An Odyssey spokeswoman said that the MHF will work with an advisory group including representatives from the MoD and English Heritage, "to ensure that best archaeological practices are adopted in line with the annexe" and to avoid damage to the wreck.

She added: "Odyssey's preferred form of compensation is cash for the work it is undertaking on behalf of the MHF."

Lord Lingfield, MHF chairman, said: "We are very concerned that natural erosion, damage from fishing vessels and illegal looting may endanger the wreck… Odyssey… has proved its expertise and we are looking forward to working with them to protect maritime heritage."

An MoD spokesman said that MHF is "not free to disturb, excavate or dispose of the site" without the agreement of the defence secretary."

