North Borneo was in an area of Asia that was dominated by Dutch influence from Indonesia and Spanish influence from the Philippines. There was also a lot of pirate activity along the long coastline with its many rivers and tree lined banks. It's shallow draughts made for good hiding places for local prahus to escape beyond European ships. The Sultan of Sulu claimed large sections of North Borneo and overlapping claims form the Sultans of Brunei. Both the Dutch and the Spanish found it easier to trade from other possessions within their respective spheres of influence but kept an eye on disruptive pirate activity along Borneo's coastline.
The first British interest in the area came as a result of expansion ideas from the British East India Company. Hitherto, it had been frozen out of much of the Spice Trade by the Dutch but its growing power in India gave it a new confidence to try again in the mid-Eighteenth Centjury. In 1759 William Dalrymple lobbied his company for permission to explore and make new charts around the China Seas. It was Dalrymple who was able to come to terms with the Sultan of Sulu in 1761 which would give the EIC a factory in his territory along the Northern coast of Borneo to facilitate trade between the Sultan of Sulu, the EIC and China. Concurrent with these developments, the EIC sent out a separate expedition against the Spanish colony of the nearby Phillippines at the tail end of the Seven Years War and managed to seize Manila itself in 1763. Unfortunately for the EIC, any hopes they had of seizing the Philippines as an EIC base of operations was scuppered by the ending of the war back in Europe before news of the seizure of Manila could be included in the peace negotiations. Therefore, Dalrymple's Borneo scheme returned to the fore. When it eventually emerged in 1770 the plan was to set up a factory at Balimbangan Island at the entrance of Marudu Bay on the Northern tip of Borneo. A small flotilla was sent there in 1773 under the command of John Herbert. Herbert was not a good choice and offered too generous terms of credit at first whilst siphoning off company funds for his own gain. When he tried to demand goods for payments already made, he offended Sulu traders whilst also earning the antipathy of pirates who were suspicious of a European base in the midst of their area of operations. Therefore, the Sulus and Pirates combined to attack the factory in 1775. The British officials barely escaped to the island of Labuan whilst their factory was utterly looted and destroyed. Herbert argued that Labuan itself might make a more appropriate base of operations but by this time the Company back in London had lost faith in Herbert and that they had already lost enough money in their investment. Herbert was recalled.
The EIC returned in 1803 to Balimbangan Island but once again hostile Sulus and pirates made life intolerable for them and they had abandoned it once more by 1805. An attempt by Raffles to colonise all of Borneo after the Dutch colony of Java was captured in 1811 was abandoned by the British in 1813 when they got cold feet about taking on new unproven responsibilities during the Napoleonic War and when they would be able to cherry pick more suitable harbours and colonies from their defeated foes in the very near future.
It was not until the arrival of James Brooke in Sarawak in 1840 that British involvement in Northern Borneo became more sustained - if administratively a little unconventional. Indeed, James Brooke was originally heading for Balimbangan Island close to Marudu Bay because of its previous association with British attempts to establish a factory. In the end, he was diverted to Kuching and ended up establishing himself in Sarawak instead. This was probably a fortunate diversion as Marudu Bay had been taken over by a formidable force of pirates at this time and almost certainly would have overwhelmed James Brooke on his single ship had he arrived there instead. As it was, James Brooke was able to have himself declared Raj of Sarawak by the Sultan of Brunei in return for his help in pacifying the local populations, fighting pirates and an annual tribute. James Brooke was able to enlist the help of the Royal Navy in the 1840s to prosecute a sustained and ultimately successful war against pirates along the entire Northern Borneo coastline and not just territory within Sarawak. His war against the pirates of Borneo was raised by concerned Liberals back in London who felt that he was using piracy as an excuse to extend his own lands and influence and to enlist the help of the Royal Navy. The Royal Navy were actually happy to have a local ally help them in extinguishing piracy in the region and were encouraged yet further by the generous prize rules given for fighting pirates and capturing their ships. In 1846, their forces took the island of Labuan at the Bay of Brunei to use as a potential base and coaling station from which to patrol the waters along the North Borneo Coastline. Unfortunately though, the political furore about the ongoing war against pirates resulted in a Council of Enquiry in Singapore in the 1850s. This actually exonerated James Brooke but criticised his ability to call upon the Royal Navy to aid him in his fight given his unclear legal status as a tribute paying Raja of the Sultan of Brunei. James Brooke continued to fight against pirates along the coastline but could no longer call upon the Royal Navy. The Royal Navy themselves were disappoined with Labuan as a source of coal and as a naval base. It was a pestilential island which was not receiving the investment required to develop its facilities and infrastructure. It did not help that the British administrators of Labuan increasingly fell out with the Rajas of Sarawak over policy and how best to deal with the Sultan of Brunei. Both James and his nephew and successor Charles Brooke were keen to expand their territory at the expense of Brunei but in return for tribute and cash payments. The administration and corruption within Brunei meant that they had difficulty in collecting taxes and subduing any dissent. However, the British were reluctant to see Sarawak take advantage of a weakened political order in Brunei.
British and Sarawak disagreements over territorial expansion was accompanied by renewed interest in developing parts of Borneo from a range of interested parties from Europe and the USA. In 1865, an American, Mr Claude Lee Moses, was able to gain permission to lease land along much of North Borneo from Brunei (including some territory that was not Brunei's to lease out). These rights were sold on to another American merchant by the name of Joseph Torry in return for a third of any profits made. The two Americans set off with 8 more countrymen and sixty Chinese to establish a settlement called Ellena in North Borneo. The colony itself collapsed through disease and financial mismanagement. This was not the end of foreign interest in the concession as Baron von Overbeck from the Austro-Hungarian Empire bought out the rights of the American concession in 1875. He was far more connected and struck up a relationship with Alfred Dent to finance his new colony. Overbeck also sought to confirm ownership of the entire parcel of land by conducting an additional agreement with the Sultan of Sulu who also claimed some of the territory. In the end, Overbeck's pockets were not as deep as he made out and he sold his interests out to Alfred Dent and a new North Borneo Chartered Company was established to take over the lands and effectively created the new colony of British North Borneo under company rule with strict rules on protecting local religions, customs and with a commitment to abolish slavery and to cede its foreign relations to Britain to administer. This was all in return for annual payments made by the shareholders to the Sultanate of Brunei.
Despite being run by a commercial Chartered Company, its officials were scrupulous in their treatment of the local population and utilised many of the best features of neighbouring Sarawak's systems of indirect government. They even managed to hire some of their experienced personnel to administer sections of the country along the lines they had in Sarawak. Its commercial nature and the conditions it had promised the British government in return for the Charter meant that it was more bureaucratically inclined and had to account for its expenditure accurately and in a timely manner. The main problem the Company had was in attracting investors and capitalists to such an out of the way location with so few obvious commercial advantages. Those products or facilities which could be developed were already being so developed in nearby Sarawak which had ports, markets, effective administration and products of its own. It would take many years before the North Borneo Chartered Company could pay dividends to its investors.
The British government had become concerned at German and French interest throughout the Asian region in the 1880s as the European powers sped up their colonial competition around the globe. In 1888, the British government agreed to make North Borneo a Protectorate along with neighbouring Brunei and Sarawak. This was a strategic and economic relief for the Company as it removed a potentially large defensive cost obligation. They could now call upon the support of the Royal Navy and British Army if any European power attempted to seize control of their territory.
The first crop of substance that produced a cash flow was tobacco for the American market. However in 1893 the Americans introduced a high tariff policy which choked off Borneo's exports suddenlty. Combined with a world wide depression in the mid 1890s, the economic outlook for the colony seemed so bleak that in 1894 its Board of Directors considered selling its rights to the land to Sarawak outright. Shareholders held their nerve and voted the proposal down. They were wise to do so as in 1896 it began to move into the black for the first time as the world economy began to recover.
In 1890, the British had decided to move Labuan into North Borneo Administration whereby the Governor of North Borneo would also be Governor of Labuan under the authority of the Colonial Office.. Labuan had failed to live up to its expectations of providing a suitable anchorage and coal station for the Royal Navy. Besides, the relative success of the Sarawak colony combined with British influence extending along much of the coastline through the British North Borneo Company meant that an island naval base to guard against pirates was becoming less and less of a priority in the region.
There were still tensions between Sarawak and North Borneo into the twentieth century especially between the two territories and along their borders with the ever shrinking Brunei. In 1902, the Company had bought another lease of territory from Brunei along the Lawas River. Unfortunately, for the company, the tribal leader in the territory announced that he would only agree to being taken over by the Raja of Sarawak. Even an attempt by the company to have the Raja's nephew, Brooke Johnson, administer the territory did little to convince the locals who associated Sarawak with stability and respect for their native rights. Seeing that they could not convice the leader that he would enjoy similar rights under Company control, the administration agreed to transfer the territory to Sarawak in return for various mineral rights still held by the Raja in and around Brunei. This goodwill gesture did much to improve relations between the two territories and helped create a stable border which remained relatively unchanged for the remainder of the colonial period.
The Colonial Office took back control of Labuan from North Borneo in 1906. This was actually much to the relief of the Comapny which had found the administration of the island to have been a difficult and thankless task. The Colonial Office in this period was actively reorganising its relationships throughout the region although the North Borneo Territory got off relatively lightly other than the loss of Labuan.
This agreement was to be shortlived though as it was transferred over to the larger political unit of the Straits Settlements in 1907.
In 1890 the British government placed the colony of Labuan under the administration of the company, the governor of the state of North Borneo thereafter holding a royal commission as governor of Labuan in addition to his commission from the company. This arrangement held good until 1905, when, in answer to the frequently and strongly expressed desire of the colonists, Labuan was removed from the jurisdiction of the company and attached to the colony of the Straits Settlements. In March 1898 arrangements were made whereby the sultan of Brunei ceded to the company all his sovereign and territorial rights to the districts situated to the north of the Padas river which up to that time had been retained by him. This had the effect of rounding off the company's territories, and had the additional advantage of doing away with the various no-mans lands which had long been used by the discontented among the natives as so many Caves of Adullam. The companys acquisition of territory was viewed with considerable dissatisfaction by many of the natives, and this found expression in frequent acts of violence. The most noted and the most successful of the native leaders was a Bajau named Mat Saleh (Mahomet Saleh), who for many years defied the company, whose policy in his regard was marked by considerable weakness and vacillation. In 1898 a composition was made with him, the terms of which were unfortunately not defined with sufficient clearness, and he retired into the Tambunan country, to the east of the range which runs parallel with the west coast, where for a period he ruled over the Dusun tribes of the valley. In 1899 it was found necessary by the British to expel him, since his acts of aggression and defiance were no longer endurable. A short, and this time a successful campaign followed, resulting, on the 31st of January 1900, in the death of Mat Saleh, and the destruction of his defences. Some of his followers who escaped raided the town of Kudat on Marudu Bay in April of the same year, but caused more panic than damage, and little by little during the next years the last smouldering embers of rebellion were extinguished.
It was occupied by the Japanese from 1942 to 1945. As Sabah, it became part of Malaysia in 1963.