Deputy Prime Minister John Prescott, who is himself a former seaman, announced the decision following a report from an officially financed underwater survey of the wreck of the 169,000 tonnes cargo carrier which capsized with the loss of 44 lives.
Mr Prescott described the pounds 2 million survey, funded by Britain and the EU, as not only one of the greatest pieces of underwater detective work this century, but even more impressive than the research done on the Titanic.
The survey report authors said structural faults did not cause the loss of the ship in September 1980. The report said that an unsecured hatch had led to the flooding of the bow area of the ship, lowering it into the waves. The force of the water ripped off the hatch covers, filled the cargo holds, and caused the ship to sink rapidly.
Robin Williams, the chief scientist on the expedition, said the Derbyshire was caught in typhoon Orphid and buffeted by 80ft waves. Successive hatch covers down the ship either exploded or imploded with the force of 17 tonnes of TNT.
The time from the hatch covers being ripped off to the stern sinking was just two minutes, and the sheer speed of the impending disaster meant a mayday call was not put out. Mr Williams continued: " Crews in this case don't know what's happening and that's good for the families of the victims in a way. It will give them some sort of solace".
The surveyors had found "a picture of total destruction with parts of this huge ship ripped apart lying torn and crumpled on the sea bed". More than 135,000 photographs were taken, and 2,000 pieces of wreckage examined. There was, according to the assessors, no one single reason for the sinking of the Derbyshire, but a combination of factors.
Relatives of the 42 crew members and two wives who died, as well as shipping unions and shipping experts, had long maintained that the Derbyshire and other bulk carriers were structurally unsound.
Asked his views on this, Mr Williams responded: " This is not a clean bill of health for the industry. We have ignored the signs and are still ignoring signs. Ships are being lost. There are no winners in this, there is a lesson for everybody in this sinking".
The report made a number of recommendations including a review of the regulations regarding how low in the water ships should sit, the possible strengthening of cargo hatch covers and the positioning of all ventilators, air pipes and access hatches.
The Deputy Prime Minister invited interested parties to submit representations on whether the formal investigation should be re-opened in whole or in part, the questions it should address, and whether it should be at the High Court or before a Wreck Commissioner.