The Company of Scotland Trading to Africa and The Indies, overseas trading company, Edinburgh, 1695-1707

What became the Company of Scotland Trading to Africa and the Indies was the idea of William Paterson, a prolific ‘projector’ or promoter of speculative money-making schemes. He had been instrumental in the foundation of the Bank of England in 1694, but his new plan aimed to bring financial prosperity to Scotland, his homeland. He proposed that the Scottish Parliament, following the passing of "An Act for Incourageing Forraign Trade" in 1693, should grant a Scottish monopoly on trade with Africa and the Indies to a trading company, enabling it to harness the lucrative Far Eastern trade.

A key part of the plan was the establishment of a Scottish colony in Central America, at a place called Darien (now part of Panama), so that merchant ships could reach the Pacific more easily, without having to make the long and perilous journey around Cape Horn or the Cape of Good Hope. Instead, goods would be transported to the colony at Darien, on the Atlantic side of the Isthmus of Panama, and carried across to a port on the Pacific side, where ships with exchange cargoes from the East Indies and Asia would be waiting.

The fact that Paterson had never actually been to Darien did not deter him. ‘The time and expense of navigation to China, Japan, the Spice Islands, and the far greatest part of the East Indies will be lessened more than half ... ’, he wrote. ‘Trade will increase trade, and money will beget money ... Thus this door to the seas, and the key of the universe ... will of course enable its proprietors to give laws to both oceans, and to become arbitrators to the commercial world.’

On 26 June 1695 the Scottish Parliament passed an act establishing The Company of Scotland Trading to Africa and the Indies. Its capital was to be £600,000 sterling, half to be subscribed in London and half in Scotland. English investors soon raised their share, but the powerful directors of the East India Company, fearing that their monopoly would be broken and their business ruined, used their influence to turn King William and the English Parliament against the venture. Indeed, the King did not need much persuading; he was anxious to be on good terms with Spain, and was conscious that the proposed Scottish colony would be located on Spanish-claimed land. The directors of the Company of Scotland were threatened with impeachment and English investors quickly withdrew their money.

The Scots, enraged by the duplicity of the King and English Parliament and carried along on a tide of national pride, resolved to raise all the capital alone. By August 1696 the revised target of £400,000 sterling had been subscribed in Scotland. This was an enormous sum, amounting to about half the country’s available capital. The company’s directors began to lay plans for the colony and in the meantime effectively used the subscribed capital, of which £34,000 was held in coin, to operate as a bank by making loans and issuing notes. These initiatives were not a success and, indeed, much of the subscribed capital was embezzled and never recovered.

Although the proposed location of the Company’s first colony was a closely-guarded secret, preparations for the expedition were public and extensive. Ships, provisions and trading stock were bought in cities across Europe, crews were recruited and the expedition’s five ships assembled in the Firth of Forth. Apart from the former French vessel Dolphin, their names - Caledonia, St Andrew, Unicorn and Endeavour - reflected Scots patriotism and hope. On 18 July 1698 this first expedition left the port of Leith with around 1,200 people, including William Paterson, on board. At a time when the total Scottish population amounted to only about one million, the amount of manpower committed to the venture was every bit as staggering as the financial commitment.

Even as they departed from Leith, the people on the expedition still did not know where they were going. It was not until the ships had passed Madeira that their captains were allowed to open their sealed orders which revealed the ultimate destination of the expedition. They were ‘to proceed to the Bay of Darien, and make the Isle called the Golden Island ... some few leagues to the leeward of the mouth of the great River of Darien ... and there make a settlement on the mainland’.

The colonists reached Darien, which they called New Caledonia, in November 1698. There they built Fort St Andrew and began to erect the huts of what they hoped would become their permanent town, New Edinburgh. They also cleared land for growing yams and maize, but successful agriculture proved difficult. The local indigenous people proved unwilling to buy the combs and other trinkets offered by the colonists. Worse still, no fleets of merchant ships arrived to initiate the envisaged entrepôt trade with Asia and India. Meanwhile, the King had instructed his colonies in America not to deal with the Scots settlement. Inadequate provisions, combined with the unfamiliar hot and humid climate, soon caused fever to spread among the settlers. Many died, and in July 1699 the colony was abandoned.

Back in Scotland some bad news had been received from Darien, but nobody knew that the colony had collapsed entirely. A second expedition, with a further 1,300 settlers on board and the newly-built ship Rising Sun at its head, set sail in August 1699. The second expedition arrived at Darien in November to find the huts of New Edinburgh in disrepair and the jungle reclaiming the land. Nonetheless, the colonists decided to rebuild the settlement. Some survivors of the first expedition returned from English colonies such as New York, where they had sought refuge, to try again at Darien.

The Spanish, although not interested in settling on the unhealthy coast of Darien themselves, were by now determined to prevent other European colonists claiming their territory. Learning of this enmity, the exhausted and hungry Scots launched a pre-emptive attack on the Spanish fort at Toubacanti in January 1700. The Scots settlers subsequently held out bravely against blockade at Fort St Andrew for more than a month before surrendering. Decimated by disease, the colonists left Darien for the last time in April 1700.

After the failure of the Darien colony the Company of Scotland struggled on, attempting to establish trading links in Africa and the Far East. However, the capture of one of the company’s ships, Annandale, at the instigation of the East India Company in 1704 led to an outbreak of ill feeling in Scotland towards England. Later that year the English ship Worcester was captured in a reprisal raid and its crew accused of being the pirates who had sunk another company ship, Speedy Return, in 1703. The crew, who were clearly innocent, were executed. Popular ballads of the time make it clear that this was seen as direct revenge for the role of England in the failure of the Darien scheme.

For King William and his successor, Queen Anne, the lessons of the Darien affair were clear. They were anxious to avoid war with Scotland, and also wanted to prevent the Scottish parliament from granting conflicting privileges and interfering in England’s foreign policy. They thus pressed for union of the Scottish and English Parliaments. After lengthy negotiations this was finally achieved by the Acts of Union of 1707.

Many Scots supported the Union because the Darien disaster, coupled with a series of bad harvests after 1695, had caused huge distress in Scotland. To its supporters, the Union seemed vital to Scotland’s economic survival, with its provisions for free trade and navigation and its payment of £398,000 (known as ‘the Equivalent’) as compensation for Darien and to support Scottish industries. The men appointed to distribute the compensation money were known as Commissioners of the Equivalent. They set up in The Company of Scotland’s old offices in Milne Square, Edinburgh. Only part of the Equivalent had been paid in cash; the rest was issued to creditors in the form of debentures. Two societies of debenture-holders were formed - one in Edinburgh and one in London - but in 1724 these two united to create the Equivalent Company. Three years later this company sought a royal charter to allow it to offer banking services outside its own membership. When the charter was granted, the new bank it created was called The Royal Bank of Scotland.

From the guide to the Records of the Company of Scotland Trading to Africa and The Indies, 14 February 1696 - 28 June 1711, (The Royal Bank of Scotland Group Archives)