In 1656, shortly after Queen Elaine ascended the throne and kicked the Montaigne out of Avalon, she realized she would need a navy to protect her borders. Since she didn't have the time to build up a navy before Montaigne could make a counterattack, Elaine elected to create the Letter of Marque. In it, she gave safe haven to any "privateer" who attacked Montaigne and Castille ships and allowed Avalon ships free passage, with the additional stipulation that they give Avalon a tenth of their take.
Many crews flocked to the shores of Avalon to gain their Letters of Marque. Safe harbours to the north of Montaigne were hard to come by, and the 10% cut and promise not to attack Avalon were more than fair trades to have a better crack at Castille and Montaigne treasure ships.
The most successful of these privateers was Jeremiah Berek. Unlike many others, Berek was an Avalon nobleman without a shred of experience on the sea. He merely wanted adventure and treasure and he had enough money to retrofit his merchant ship into a fighting vessel (now called "The Black Dog").
Fortunately for Berek, he was charismatic, cunning, and criminally lucky. Before long he had gathered one of the most skilled crews in Theah and became one of the richest pirates in history.
His crew wasn't initially known as the Sea Dogs; the name came later after an argument with a Castille ambasador. The Castille ambassador demanded the head of Berek after he attacked a particularly important Castille treasure ship. Much to the ambassador's surprise, Berek was in the room, proudly wearing a golden cross meant for the King of Castille. When the ambassador demanded it back, he kept calling Berek a "dog". Berek of course never relented - seeing the Castille ambassador so upset was worth all the political ramifications as far as he was concerned.
Later, while the ambassador was enroute back to Castille, Berek and his crew attacked the vessel, capturing it easily. When it came time for the Castille to surrender to the captain, Berek merely brought out a small terrier he'd named "Captain" and demanded the ambassador surrender to the dog.
The tale of Berek and the "Captain" spread far and wide, much to Berek's delight, earning them the title "Dogs of the Sea". Never the one to stand on pride, Berek accepted the name. To this day, the small Highland Terrier is the official captain of the "The Black Dog" and all captured vessels must surrender to him.
While Berek is the leader of the entire Avalon privateer fleet, the title is mostly a formality and only becomes important when defending Avalon from enemies. The "true" Sea Dogs are the crew of The Black Dog.
The Sea Dogs' success can be largely attributed to Berek's cunning tactics, the crew's intense skill, and the ship's resident Glamour mage who has successfully turned the legend of the Sea Dogs into a source of magic.
The Sea Dogs are major members of The Pirate Nation due in no small part to the legendary status of the Sea Dogs, their hated reputation, and their enormous wealth.