The CEO of Maritime Safety Authority Fiji says the vessel Lomaiviti Princess II "went down" after being towed out of Narain Jetty in Suva by Fiji Ports.
Joweli Cawaki said Lomaiviti Princess II was unmanned when it capsized at about 4pm on Monday and nobody was injured.
"The boat just tilted to one side and took in water and it went down," Cawaki said.
The vessel had been tied up at Narain Jetty since 2019.
The Fiji Ports - which runs the jetty - served Goundar Shipping which owns Lomaiviti II a removal notice.
"Ports came in with a tug and pulled the vessel out; once the vessel was pulled out, it went down," Cawaki said.
"It was a risk in all senses of the word risk - it took up space at the wharf and it's been used as Goundar Shipping as a dumping ground and now that it has sunk, it has sunk where there is a channel."
He said other vessels could hit Lomaiviti Princess II. It is sitting in just under two metres of water.
Cawaki said a boom used to contain oil spills is around the ship and people are watching at all times for any oil leaks.
"According to Goundar Shipping there's not much in the inside of the vessel, in terms of the chemicals and the oil."
He said the ship could be salvaged by pumping out the water and blocking the holes.
Cawaki said a meeting today would decide what would be done with the vessel.
On May 26, passenger ferry Lomaiviti Princess VII ran aground in Ono-i-Lau, and it was towed back to shore by Lomaiviti Princess XII which also took the stranded passengers.
RNZ Pacific reached out to Goundar Shipping managing director George Goundar who refused to comment.