Piracy throughout Scarterra

Scarterra follows the same historical pattern that Earth's ocean's see. If you have busy lanes of commercial shipping, you are going to either have a lot of pirates or a lot of efforts to stamp out piracy...or both.
About 90% of Scarterra's commercial shipping is in the Inner Ocean while the remaining 10% is in the Outer Ocean.
Even though the Outer Ocean almost never sees a national warship that could threaten a pirate ship, you don't see a lot of pirates here because there aren't a lot of potential targets for pirates to plunder here. Most pirate ships and most anti-pirate patrol ships are in the Inner Ocean because this is where merchant ships frequent.

The Elven Empire, government is the strongest organized naval power in Scarterra and they take a dim view of piracy. The grey elves pride themselves on being reserved and chivalrous but they give their sailors a lot of leeway to use brutal tactics against pirates. The infamous Eye of the Empress is crewed by Lunatan cyclopes and they have legal permission from the Empress to eat any pirates who refuse to surrender.

Flag of the Eye of the Empress ship by Me

The Kingdom of Kantoc and Dwarf Kingdom of Stahlheim both have much smaller navies (but growing). The Elven Empire is not exactly thrilled to have emerging competitors to their naval supremacy but the three nations have signed treaties promising not to engage in privateering and cooperating against pirates in their territorial waters. Likewise with the Umera powers but they rarely patrol especially far from their shorelines.
The area between the Island of Lunatus and the north shores of Island of Khemarok is heavily patrolled by the Elven Empire's mighty navy (aided somewhat by the tiny navies of Kantoc and Stahlheim) meaning any pirates here are either very good or very desperate.
The further east you go from Lunatus the thinner the Elven Empire's patrols are and thus the more pirates you see, but the grey elves are not giving up on their anti-pirate crusade easy. Sometimes anti-piracy naval ships can pop up in far flung places such as around Penarchian and East Colassian shores.
The line between independent pirate and nationalistic privateer is often blurred in Scarterra's eastern waters. The various feuding Penarchian states quarrel all the time on land and sea and many privateers raid the ships of other nations with a few pirate ships mixed in flying no one's colors.
Likewise, the southern coastline of East Colassia is rife with privateers and pirates that are hard to distinguish.
Supposedly, the dark elves of Kahdisteria and the humans of the Colassian Confederacy have a binding armistice and neither side seems to have broken it over land that is.
Both sides are not shy attacking ships belonging to the other power. It is pretty obvious that these raiding ships are privateers but if caught, the ships and their crews are always disavowed and declared independent pirates.
Because of this, merchant fleets from both powers now normally travel in large convoys for protection and this has tamped down on naval skirmishes here, but many fear (or hope) that an attack on a convoy will make a big enough splash that the incident will not be able to be swept under the rug and lead to the armistice being tossed out and full on war resuming.

How does Scaraqua Fit in?

Scaraquans try to rob each other all the time, but they don't call it piracy, they just call it "theft".
Some Scaraquans have taken to sinking Scarterran ships and then picking the corpses like vultures. The Storm Thief is an infamous mermaid pirate who does just that.
It is difficult for Scarterrans to retaliate and even if they equip a group of adventurers with magical water breathing aids and say "Go get them bad fish people!" they have trouble identifying which Scaraquans attacked them and which didn't.
Despite the lack of effective retaliation, underwater piracy is less common than you would think. Most Scaraquans are not offended by merchant ships passing over them.
Despite their seeming advantages in a hypothetical war with "the land dwellers" many don't want to provoke a new enemy when they have enough trouble dealing with other underwater factions.
Not every Scaraquan that wants to sink ships has the means to reliable puncture a hull beneath the waterline submerging it.
Another option is to board ships temporarily and kill the sailors on board with hit and dive attacks, but not every Scaraquan has the means to survive even short periods of time aboard a ship. This is a viable tactic, but it still lets the Scarterrans fight back, especially if the Scaraquans are not able to scale the side of the hull especially quickly.
Then there is the issue, that a goodly portion of the goods on a ship become damaged or completely ruined if they are sank into the sea. Even if a Scaraquan has the raw power to sink a ship, doing so is not always profitable.
One point of conflict between Scarterrans and Scaraquans is fishing vessels. While most Scaraquans are indifferent to Scarterrans using ships as a means of moving people or freight over long distances, many feel threatened by Scarterran fishermen.
Tall tales aside, it is rare for a fisherman to catch a mermaid in his net, but in many areas, Scarterrans and Scaraquans are exploiting the same population of fish. In theory, every fish a Scarterran catches is one that a Scaraquan can't and visa versa. Hardliners on both sides view the fishers of the other side as little better than poachers.

"Why cannot they stay on the land and eat their goats and other land fish. The seas are clearly our territory by divine right."
-Cherith, mermaid centurion

"You ask me why I always take a harpoon with me when I go fishing for halibut? I don't keep the harpoon for halibut, boy. I keep it for mermen...and worse.
The mer people have endless depths of the ocean to harvest fish from, and the finned misers cannot let us skim a few fish off the surface? It's not like we are keeping all the rainfall for ourselves."
-Kinmei, Umera fisherman

Usually in these quarrels, Scaraquans are the aggressors. They will either passive aggressively sabotage rudders and nets or they will seek to drown the fishermen outright.
Once, these attacks are rare, but as the Scaraquan and Scarterran populations increase, these confrontations are becoming more frequent and more violent.