In 1664, France established the French East India Company (Compagnie française des Indes Orientales) as a chartered entity, aiming to rival the Netherlands and England in trade ventures across the East Indies, which encompassed the Asian region. Established during the reign of Louis XIV by Jean-Baptiste Colbert, this entity was directed to create a competitive edge against fellow European colonial powers.
Key Takeaways: French East India Company
- In the 17th century, the French East India Company emerged as a pivotal French trading entity. Its primary objectives encompassed fostering trade and extending French influence across the Indian Ocean and Southeast Asia.
- Of particular note, the city of Pondicherry (Puducherry), situated on India’s southeastern coastline, stood as a significant stronghold and a prominent center of French colonial influence.
- While engaged in its undertakings, the French East India Company encountered financial struggles and grappled with competition from European adversaries. The company’s dissolution took place in 1769, ultimately resulting in the transfer of its territories and trading posts under the purview of the French monarchy.
Jean-Baptiste Colbert came up with the idea for this ambitious project, and King Louis XIV granted it official recognition through a charter. The primary objective was to actively participate in commercial activities within the eastern hemisphere.
The company’s formation marked the amalgamation of three antecedent enterprises: the French China Company established in 1660, the Orient Company (compagnie d’Orient) established in 1642, and the Madagascar Company (Compagnie de Madagascar) established in 1637.
The directors of the company were chosen from individuals who had gained experience in the most successful companies of that time.
François Caron, a Huguenot exile who had spent 30 years working for the Dutch East India Company, was named as its first director by Colbert. Additionally, Marcara Avanchintz was an Armenian merchant from Isfahan, Persia, who had numerous connections and brought the first firman to open the way for the company’s trade with India. The company’s headquarters were initially in Le Havre, then in Lorient, a newly established port, in 1666.
Organizational Structure of the French East India Company
In 1664, under the direction of Colbert, the company was founded, marking a period during which England and the Netherlands had already embarked on an ambitious journey of extensive trade. The Dutch had pioneered this endeavor back in 1602, establishing their own enterprise. Holding an exclusive trade monopoly with Asia, they possessed a substantial capital of 6.3 million florins, open for subscription to all citizens.
The English swiftly followed suit, establishing their own British East India Company in 1613, which also welcomed ship proprietors and traders to contribute to its significant capital base. So, both the Dutch and the English chose strong institutions with a lot of money because they were the only ones that could help build ships, improve local commercial infrastructure, and make sure transportation was safe.
In many respects, the French East India Company drew inspiration from these experiences, particularly in terms of the very high amount of its capital. Set at 15 million livres, it made the company the foremost financial entity in the kingdom.
The king and his family subscribed for 45% of the shares, the nobility and ministers 19.5%, and financiers 8%, in contrast to their Dutch and English counterparts, which gave merchants a significantly smaller role. Therefore, the company was primarily a state affair. Merchants and bankers would come into play later, in the 18th century.
12 well-known Parisian businessmen appointed by royal decree formed a management committee for the company on June 5, 1664, with Colbert serving as chairman. The company’s capital was set at 15 million livres. The breakdown of investments included the king contributing one-fifth, or 3 million livres, while the queen, the crown prince, the Condé and Conti Dukes, and Colbert each offered sums ranging from 60,000 to 30,000 livres. The royal court as a whole contributed 2 million livres in cash. The High Court and financiers provided 2 million livres each; merchant guilds committed 650,000 livres, and various cities, such as Lyon, Paris, Rouen, and Bordeaux, were allocated sums based on population ratios.
Possessing exclusive control over trade activities across the Asian region, the corporation emerged as a veritable force, akin to a self-governing entity. Within the boundaries of Asia, it held the authority to engage in diplomatic affairs with indigenous rulers, to engage in negotiations and formalize both trade and political agreements, and furthermore, to uphold a military presence, establish coinage (a mint was founded in Pondicherry, India), and oversee matters of civil and criminal justice.
These extensive privileges highlighted the distinctive role that the establishment’s representatives played. Colbert, functioning as both the Minister of Finance and the chief counselor to Louis XIV, was present at all gatherings.
Overseeing the company’s internal affairs were royal delegates, ensuring adherence to the king’s directives. These delegates chaired the board of executives, implementing the minister’s guidelines and furnishing him with operation updates. The company’s directors, ranging from six to eight in number, each helming a department, were designated with the endorsement of the Minister of Finance.
The First Voyages of the French East India Company
In 1665, the company’s first voyage consisted of a fleet of three merchant ships totaling 300 tons, accompanied by smaller vessels. On the way back, the English sank one ship as a result of the Second Anglo-Dutch War’s effects. This incident damaged the company’s reputation, leading to financial difficulties until the third voyage.
Disagreements arose during the shareholders’ assembly as the Mayor of Paris and executives protested against extensive funding being allocated for the colonization of Madagascar. Despite opposition, Colbert and the king remained committed to colonial ventures. However, in 1669, they eventually abandoned the idea due to reports of Madagascar’s barrenness, refocusing the company’s efforts on Indian trade.
Subsequently, the company sent out annual fleets, except for 1673, conducting successful trade with India. Between 1669 and 1674, the company’s capital increased to 27 million livres. The king contributed 1.5 million livres, with the remaining funds coming from shareholders. In 1672, the Indian rulers granted Pondicherry on the East Coast of India to the French.
By the following year, François Martin (Pondicherry) had established a base there, expanding French influence deep into India. Under Martin’s leadership, Pondicherry prospered as a thriving trade hub.
Despite success in India, the company faced deficits in its trade with the southern regions. By 1684, due to mounting losses, the majority of shareholders had rejected further investment. However, in 1685, with the efforts of Colbert’s son, Marquis de Seignelay, the company was restructured and rebranded as the New East India Company.
Ministers and merchants contributed the majority of the 1,685,690 livres set as the capital. Seignelay appointed 11 executives, which were later increased to 20 in 1687.
The company thrived without direct royal intervention, with dividends reaching 30% between 1687 and 1691. The majority of imports from India were textiles, especially dyed and printed fabrics, with cotton being more common than silk. Other imports included spices like pepper, coffee, tea, realgar, and saltpeter.
Regarding trade in the southern regions, the company expanded into Southeast Asia, establishing diplomatic exchanges with the Ayutthaya Kingdom in present-day Thailand. Ayutthaya envoys visiting Louis XIV’s court attracted the attention of French nobles. However, following a coup in 1688, the influence of Buddhism regained prominence in the Thai court, leading to the expulsion of foreign entities.
Liquidation, Reconstruction, and the Economic Bubble
The Dutch captured Pondicherry in 1693 during the Anglo-French War. Martin relocated to Chandannagar, establishing it as a new relay base. Struggling with financial difficulties in 1702, the company petitioned the king for relief funds.
In exchange for a loan of 850,000 livres, the executives were required to invest 40,000 livres each, while shareholders were also asked to contribute. This decision sparked a significant backlash from shareholders at the annual meeting, prompting the company to initiate a gradual liquidation process starting in 1710.
During the reign of Louis XV, the Duke of Orleans, acting as regent, incorporated John Law’s extensive development plan. The law established the Western Company, initiating the colonization of Louisiana and linking it to the Royal Bank. In 1719, Law amalgamated all state-owned trading companies into a unified entity known as the India Company.
The shares of the India Company and the banknotes of the Royal Bank were merged, resulting in rapid and disproportionate speculation, leading to an economic bubble.
By 1720, the India Company possessed a fleet of 300 vessels, both completed and under construction. With escalated speculation in the company’s stocks, a subsequent market crash ensued, leading to Law’s downfall. In 1725, the India Company was separated from the Royal Bank and the Louisiana Project. In 1731, the company refocused on Eastern trade, abandoning trade with Africa and Louisiana.
Meanwhile, in India, Governor Joseph François Dupleix established the Carnatic Alliance, bringing Southern Indian princes under his influence and briefly overpowering British forces in central and southern India.
Dupleix also aided the Mon Kingdom of Pegu in Lower Burma, attempting to expand into Burma, but excessive spending in Asia prompted his recall by the French government. Subsequently, the Alaungpaya King of the Konbaung Dynasty, advancing from Upper Burma, captured the French trading post at Syriam port and captured two French ships with 200 soldiers aboard while trying to provide relief.
The Battle of Plassey and British Superiority
As the Seven Years’ War commenced in Europe, hostilities between England and France were reignited in India. Robert Clive of the British East India Company achieved a decisive victory in the Battle of Plassey in Bengal.
Although the French briefly recaptured English-held Madras, they eventually lost their stronghold of Pondicherry to the British. The Treaty of Paris in 1763 resulted in the loss of most French Indian colonies.
However, they were allowed to retain non-military bases in South India, such as Pondicherry and Chandannagar (now under the Pondicherry federal territory). The British took the majority of the company’s ships, which was a devastating blow.
Banker Jacques Necker was in charge of the business’s financial reconstruction following the war. However, the company’s exclusive privileges faced fierce opposition from advocates of free trade, particularly those aligned with agrarian economic theories.
In 1769, the East India Company had its commercial privileges suspended east of the Cape. Indian trade became liberalized, and the relationship between the company and the state was redefined, leading to a comprehensive liquidation.
The company relinquished all colonies, assets, real estate, fleets, and crews to the king. The state took on the company’s debt and agreed to pay an annual sum of 12 million livres. Although no longer a trading company with privileges, the East India Company continued as a conduit for dispatching fleets to Asia.
The National Constituent Assembly’s Opposition to the Company
The company was on the verge of closure as it dealt with its colossal debts. However, on April 14, 1785, Controller-General Charles Alexandre de Calonne established the New India Company, facilitating its reconstitution to compensate for the deteriorating state finances.
The new company inherited the privileges of the old one, gaining a monopoly on commerce in India and east of Cape Town, rights to Lorient Harbor and docks, and usage of the Paris trading post. Slave trading would require the company’s permission moving forward.
The capital was set at 20 million livres, divided into 20,000 shares, with 14,000 shares released in the stock market. Due to collusion between Despaniac, a court merchant, and Calonne, the share price surged by 80%.
The issuance of shares doubled in 1786, and shareholder meetings were held twice a year. While King Louis XVI appointed 12 directors, supervisory commissioners were in charge of the oversight committee, which had actual managerial control. The first was a member of the Council of Finance, then came Finance Minister Lambert.
Around the onset of the French Revolution, thanks to the Anglo-French Commercial Treaty (Eden Agreement), the company’s operations thrived, and its stock price surpassed its nominal value. With substantial profits, dividends reached 160 livres per share.
However, the privileges of the India Company were criticized during the National Constituent Assembly. In 1790, despite opposition to the abolition of the slave trade, the Bordeaux representative argued that the India Company hindered commercial progress, leading to its abolition.
While there were arguments in favor of upholding the privileges, the generally pro-free trade National Constituent Assembly opted to abolish the monopoly east of the Cape, reintroducing liberalization. Despite no longer enjoying privilege-based status, the India Company, now restructured as a modern joint-stock corporation, continued to succeed in trade and business.
Company Liquidation Scandal, Collapse, and Final Dissolution
The impact of war and the Reign of Terror posed challenges for the India Company. In December 1791, a transfer tax on securities was introduced to curb speculation contributing to the fall of Assignats.
In response, the India Company’s directors, in alliance with Girondist Finance Minister Etienne Clavière, began evading taxes. Clavière was a friend of Baron de Batz, a major shareholder and company director.
In the midst of the Reign of Terror, suspicions arose that the East India Company was involved in counter-revolutionary attempts. This led the Convention to approve the closure of the company’s premises on July 26, 1793. On October 11, 1793, another authoritative decree that definitively dissolved the East India Company and took possession of its assets and ships worth roughly 28,544,000 livres followed this.
However, as the Girondists fell from power, pressure mounted to investigate the irregularities within the now-vulnerable company. The National Convention resolved to liquidate the India Company, leading to a large-scale scandal involving bribery and corruption, ensnaring former Girondist and Dantonist members in a series of trials known as the India Company Scandal.
Many were purged or imprisoned. Additionally, British forces occupied Chandannagar in June 1793 and Pondicherry in August, resulting in the destruction of all trading posts. With maritime blockades by the British, trade came to a halt.
Following the Thermidorian Reaction, incarcerated India Company directors were released, but the company underwent a process of liquidation. Prolonged disputes regarding compensation to the state and claims on the Treasury persisted after 1795.
The cancellation of these claims occurred twice, in 1796 and 1864, under the finance ministers of the time. On May 15, 1875, the final shareholder meeting was held, and all remaining assets were distributed, marking the complete dissolution of the company.
Chronology of the French East India Company
- 1604: Henry IV authorized the creation of the French East India Company.
- 1635: Cardinal Richelieu established a port in Madagascar.
- 1662: French Jesuits established a presence in Ayutthaya, Thailand.
- 1664: The French East India Company was established under Colbert’s initiative.
- 1665: The colonization of Bourbon Island (Réunion Island) began.
- 1673: Establishment of a trading post in Pondicherry.
- 1674–1706: François Martin became head of the Pondicherry trading post.
- 1680: Ayutthaya sent a diplomatic mission to France.
- 1684: The Second Ayutthaya Mission was dispatched to France, and the East India Company was temporarily liquidated (dissolved).
- 1685: A French mission led by Chevalier de Chaumont arrived in Ayutthaya, and the Thai-French Trade Treaty was concluded. Reestablishment of the East India Company under the new name.
- 1686: Third Ayutthaya mission to France.
- 1687: A French envoy arrived in Ayutthaya to renew the treaty.
- 1688: Cooling of relations between France and Ayutthaya due to the palace revolution.
- 1693: The Dutch East India Company occupied Pondicherry, later returning.
- 1710: East India Company began liquidation (second dissolution).
- 1719: Establishment of the state-owned trading company “India Company.”
- 1724: Sending of merchant ships to Canton, China.
- 1731: Revival of the East India Company.
- 1740: Occupation of France Island (Mauritius).
- 1740–1748: War of the Austrian Succession.
- 1742: Duplex became governor of Pondicherry.
- 1744–1748: First Carnatic War.
- 1749–1754: Second Carnatic War.
- 1750: Treaty with the Mon Kingdom in Lower Burma.
- 1754: Duplex was dismissed, and a ceasefire with Britain was reached.
- 1756: Captured the port of Syriam by King Alaung Paya in Burma and seized two French ships, Seven Years’ War, Third Carnatic War.
- 1757: Battle of Plassey.
- 1758: French siege of Madras.
- 1760–1761: British siege and capture of Pondicherry.
- 1763: The Treaty of Paris led to territorial losses.
- 1769: The third liquidation of the East India Company began.
- 1778: Capture of Pondicherry due to French involvement in the American Revolutionary War.
- 1783: The Treaty of Versailles returned occupied territories.
- 1785: Reconstruction of the India Company.
- 1793: The fourth liquidation of the India Company began.
- 1795: Practical dissolution of the India Company.
- 1875: Completion of liquidation.
- 1954: The French government returned the administrative authority of Pondicherry and Chandannagar to India.
References
- Kobayashi, Yoshiaki (1969), Economic Structure of the French Revolution, Chikura Shobo
- Soboul, Albert (1975). The French Revolution 1787–1799. New York: Vintage. ISBN 0-394-71220-X Retrieved 2011 May 1.
- McCabe, Ina Baghdiantz (2008) (in English). Orientalism in early Modern France. Berg. ISBN 978-1-84520-374-0 Retrieved 2021 May 5.
