Labuan first came to the attention of the British thanks to the exploits of William Dalrymple working on behalf of the East India Company as they sought to intrude on the valuable Spice Trade from which the Dutch had so ably kept the British at bay for so long. Dalrymple made an agreement with the Sultan of Sulu in 1761 whereby he was allowed to set up an EIC factory in the Sultan's lands including those of North Borneo and the island of Labuan. Flush from success in India, the hopes were that the EIC could benefit from the trade between the Spice Islands, China and the Philippines. The inclusion of Labuan Island in the original agreement was actually a bit cheeky as they were more properly claimed by the Sultans of Brunei. The EIC ended up building their factory in Northern Borneo at Balimbangan Island in 1773. However, EIC leadership ended up offending Sulu traders who eagerly allied with pirates hostile to the idea of a European base in their heart of operations to attack and sack the EIC factory. The EIC officials barely escaped with their lives and ended up fleeing to the island of Labuan for sanctuary. The EIC commander, John Herbert, communicated that Labuan might actually make a far more suitable location for a factory and base than Balimbangan Island had proved to be. Back in London, the EIC were concerned at the amount of money that had already expended on their foray into the region for such little return and were concerned at John Herbert's competence and indeed his honesty. They decided to cut their losses and ordered the survivors to leave immediately. A separate attempt by the EIC to seek compensation from the Sultan of Sulu failed ignominiously.
Labuan next came to the attention of the Royal Navy via James Brooke's campaign against the pirates of Sarawak as he sought to establish control along the coastline there. He had been given the title of Raja of Sarawak in return for his military help in a civil war and in the suppression of piracy. The Royal Navy initially helped him with this second endeavour as it suited their goals for the region also. James Brooke had initially worked successfully with Henry Keppel and his HMS Dido and had achieved some notable victories. Keppel's replacement was Sir Edward Belcher on HMS Samarang. Initially, this cooperation also seemed to be successful until HMS Samarang ran aground. The Royal Navy sent more ships from Singapore to help rescue the ship - which actually managed to free itself before they arrived. The flotilla of ships put into Brunei and somewhat overawed and impressed the Sultan who promptly decided to convert James Brooke's title into one that he could pass on to his heirs in perpetuity. However, when James Brooke tried to convince Captain Belcher of the value of Labuan as a coaling station and a useful base to continue the war against pirates from, he was to be disappointed. Captain Belcher was keen to set sail as he had fallen behind schedule and although he did stop off on Labuan for a very brief visit, he quickly declared that the coal deposits were inconsequential despite only the most perfunctory of inspections. James Brooke was to be disappointed in the report Captain Belcher filed with the Admiralty regarding its appropriacy for a base in the region. Captain Belcher had also been evidently underwhelmed by Brunei and regarded James Brooke as little more than an adventurer. This official castigation deeply offended James Brooke and seemed to scupper his plans for tying the British to the region and thus to be able to support him in his state of Sarawak. Captain Belcher himself was ordered back to Borneo to help James Brooke deal with rumours of a European lady being held captive by pirates in the region. Captain Belcher seemed better disposed to both James Brooke and Labuan on this second encounter. Increased outside interest and political developments inside Brunei were to transform official attitudes remarkably rapidly.
The outside interest came from the United States who despatched USS Constitution to Brunei in 1845 to discuss a Trade and access to coal deposits for American ships and businesses. Britain and the United States were still in disagreement over the land borders of Canada and the US at this period of time and were very much in competition with one another. The fact that an American warship had called on official diplomatic duties raised eyebrows back in London. The Sultan of Brunei may well have been minded had the Americans not relied on a drunken interpreter who James Brooke knew only too well as he had only recently relieved this same man due to his obvious ineptitude.
The internal political development was an unexpected palace coup in Brunei itself. This saw James Brooke's local Brunei supporters savagely murdered along with many other princes and minor royalty. This had all been committed with the connivance of the Sultan himself and an adopted son by the name of Hashim Jelal. He had convinced the Sultan that Brunei had to be protected from foreign dominance, in ignorance of the fact that the Royal Navy and the British government had decided not to get involved further in the Borneo's politics. The vicious nature of the slaughter attracted Britain's attention as they realised that James Brooke's own position as Raja might have been fatally compromised also. The Royal Navy also argued that piracy would return to the area in full if James Brooke were not supported in his anti-piracy campaigns. They therefore agreed to send a flotilla of ships to accompany James Brooke into Brunei Bay. Only token resistance was offered by the forces of the Sultan in the face of such overwhelming force. The Sultan and much of the population of the city fled into the interior at the sight of the Royal Navy's presence. The Sultan ultimately reappeared after being guaranteed his own personal safety but he was forced to do penance at the graves of the victims of the palace massacre. Furthermore he was required to write a letter of apology to Queen Victoria and James Brooke's title was not only re-confirmed but his requirement to pay an annual tribute was removed as an obligation. It just so happened that a new active interventionist Foreign Secretary came to office at the tail end of the incident by the name of Lord Palmerston. He gave permission to annex Labuan to the British Empire in order to forestall foreign interest in the area, to develop a coaling station for the Royal Navy in an increasingly important part of the world, to keep an eye on the approaches to Brunei and to launch further anti-pirate campaigns from in the region.
December 24th 1846 saw the British flag hoisted over Labuan for the first time. In the terms of the treaty, Brunei confirmed the cession in return for Britain's continued suppression of piracy in the region. James Brooke was granted the position of the island's first governor in addition to his role as Raja of Sarawak and of Consul General in Brunei. He was instructed to begin the process of building port facilities and to encourage commerical exploitation of the coal reserves to make them available for the Royal Navy.
In 1848, James Brooke arrived in Labuan after having returned to Britain to widespread acclaim for his exploits and success in Borneo as a whole. He was accompanied back by William Napier who was to be his Lieutenant Governor on Labuan and Hugh Low who was due to be the island's colonial secretary but was also an acclaimed botanist in his own right. Brooke's initial views on Labuan were not encouraging as he realised just how pestilential and disease racked the island truly was. Indeed, he himself came down with sickness himself and had to be evacuated to Kuching to recuperate. It was not an auspicious start.
A company to exploit the coal reserves was formed back in London under the direction of James Brooke's representative Henry Wise. The Company was called the Eastern Archipelago Company and it was awarded a Charter on the basis that it would raise enough cash to invest in the coal and mineral industries in Sarawak and Labuan. However, James Brooke quickly became disillusioned with the inefficiency of the company with regards to its commitments in Sarawak's antimony extraction. It was allowed however to continue in Labuan itself. However, even here, the company's representative, James Motley, was not having much success. He was more than a little irritated to find that a rival businessman by the name of William Henry Miles had been given permission to extract the far easier surface deposits on a short term 2 year contract by the new Lieutenant Governor Napier. This was quickly exhausted leaving the far more complex deep mines in the north of the island to be exploited next. They were to be frustrated that the colony neither had the funds nor the will to build roads to the north of the island. Although it should be noted that the administrators had expected the company to have enough funds to provides for its own infrastructure requirements. The long and the short of it was that the company was seriously under-capitalised and had not raised the funds that it had promised. Furthermore it had not gained the confidence of James Brooke despite it being a construction of his representative. In fact, James Brooke and Henry Wise were to part ways on highly unfriendly terms over fundamental disagreements over commercial exploitation of Brooke's lands in Sarawak and Labuan. Wise felt that commerce should be given more assistance whilst Brooke was keen to protect the rights of the local population and refused to allow the EAC for instance to import labour against their will on to Labuan. The Royal Navy was to add its disappointment in the colony's initial developmentwhen Keppel called in to the island in 1848 in expectation to re-coal. There was almost no coal available and what coal was available had to be loaded by the ships crew itself. Admiral Collier was similarly disappointed when he arrived at Labuan shortly after.
James Brooke's status as governnor of Labuan accidentally provided a pretext for his commercial enemies to combine with unexpected attacks on the nature of piracy in Borneo brought about by Liberal sceptics of his empire building reputation in the region. The status of James Brooke's salary opened the parliamentary door to an examination in whether he had acted properly on calling on the Royal Navy to help suppress piracy or whether he had used the Royal Navy to suppress opposition in the region so that he could take their land. It was a long and tortured process that lasted many years. It did not help that in 1849 he had accused his own Lieutenant Governor Napier, incorrectly as it happened, of engaging in trade despite his official position and had had him replaced. The list of enemies of James Brooke was considerable and they were ultimately able to call for a court of enquiry to take place in Singapore. James Brooke was so annoyed with the weak coalition government that had called the enquiry that he offered to resign his post as Governor of Labuan and Consul-General of Borneo. He also recommended the abandonment of Labuan as the British government were making it clear that they were not going to provide adequate funds for its development. As it happened, the court of enquiry cleared James Brooke of the most serious charges but did place stipulations that would make it harder for him to call on the help of the Royal Navy in any future engagements. His offer of resignation was only accepted after the completion of the enquiry. A new Governor, George Warren Edwardes, was despatched from London to take his place. His friend and secretary Spenser St. John was offered the more vague title of Consul-General of Borneo to be based in Brunei. James Brooke turned his attention back towards Sarawak and left Labuan pretty much to its own devices disappointed about the lack of official recognition from Britain and the implied lack of future support from the Royal Navy in particular.
In 1860, the Governor of Labuan became involved in a diplomatic row with Sarawak over territory in Brunei's territory. Governor Edwardes sided with Brunei when he temporarily assumed St John's role as Consul General for Brunei as he returned to Britain over a dispute on the status of the port of Muka lying in Brunei but close to Sarawak. A local governor had closed the port and the all important Sago trade along the river. The Sultan of Brunei had actually wanted trade to restart with Sarawak but his vassal was playing his own game for influence. Governor Edwardes sided with this vassal and ordered the two nephews of James Brooke to withdraw after they had started to attempt to reopen the port by force. His direct intervention on the East India Steamer, the Victoria, caused a furore in the region as rivals to the Brookes assumed that they had lost the confidence of the British government and emboldened their claims against Sarawak. St. John himself was horrified when he heard of the intervention and lobbied the British government directly before hurriedly returning to Brunei with James Brooke to try and resolve the diplomatic standoff created by Governor Edwardes. The British government rebuked Governor Edwardes and apologised to James Brooke and offered him the services of the Royal Navy and Royal Marines to reestablish his authority and take control of Muka which was done with the permission of the Sultan of Brunei and in the return for a payment and a pension. However, the incident did highlight the growing rift between Labuan and Sarawak. Labuan had always intended to be a trading entrepot, a naval base and a coal producer. The coal production had been sorely disappointing. The effective suppression of piracy from Sarawak had reduced Labuan's strategic importance to the Royal Navy and the rise of Kuching with a far larger market and equally friendly terms of trade and European standards of business meant that Labuan was struggling to attract the merchants and traders that it had hoped for. It did not help that nearby Brunei's significance was declining in economic and political importance.
1868 saw the arrival of a particularly cantankerous but well connected Governor John Pope-Hennessy who further strained relations between Sarawak and Labuan. It did not help that for reasons of economy, he was also made the full time Consul General to Brunei as there was otherwise felt to be so little to keep him occupied. This made him more powerful and more likely to fall out with the new regime of Charles Brooke in Sarawak.
John Pope-Hennessy's ability to quarrel with anyone and his inability to receive any criticism made for an unhappy period for Labuan and especially for its officials. Anyone who questioned his authority and motives was likely to spend time in the local gaol. In 1870, an Admiral of the Royal Navy was appalled to discover that Governor Pope-Hennessy had gaoled so many of his own officials for disagreeing with him in minor matters, he reported the governor back to London. An enquiry was set up recommending his removal. Although in fact he would merely be moved to other colonial posts and chaos and arguments tended to follow him whereever he was posted to.
The troublesome territory