1 of 2

Full Text

The Conditions for Change

The Deed of Surrender. The National Archives of the UK, ref.CO42/694

In 1670 the Royal Charter granted Hbc a trading monopoly over the Hudson Bay watershed. In 1821, when the Company merged with the North West Company, the Charter was renewed for a period of 21 years and its monopoly extended from Labrador to the Pacific, from the Pacific Northwest to the Arctic Ocean, an area approximating one twelfth of the Earth’s land mass. However, by the mid-19th c. a number of trends had appeared, which, taken together, would inexorably lead HBC to give up its monopoly over its territories.

First of all, access to representative government in the Canadian colonies (Upper and Lower Canada, Nova Scotia and New Brunswick) was fostering a developing interest in Home Rule, a trend that would reach its conclusion with Confederation in 1867. Proponents of self-government – exemplified by George Brown, editor of the Toronto Globe – wanted the vast Western territories of Hbc to be made available for colonization and expansion. Meanwhile at Red River the settlers appealed to Britain either for annexation to Canada (as the union of Upper and Lower Canada, established in 1841 was known) or status as a colony.

Britain for its part, wanted to maintain its power and influence in North America, particularly in the face of the American vision of “Manifest Destiny”– by which the United States saw itself as ordained to expand across the North American continent. American interest in the Pacific Northwest had led Britain to establish the Vancouver Island colony in 1849, followed by the British Columbia colony, on the mainland, in 1858. In this HBC had proved a useful tool of British colonial policy. Since Britain had little or no administrative apparatus in place, HBC provided the infrastructure and personnel for the bulk of the colonial government on the West Coast – in a very cost effective way. But the British government was finding it harder to defend HBC’s monopoly. In Britain opponents were outraged at the Company’s exclusive right to trade, while overseas the democratic aspirations of incoming colonists were thwarted by this anachronistic arrangement.

HBC, too, was tired of colonial administration. Though enjoined by the British government to promote it, fundamentally settlement and the fur trade were at cross-purposes. As colonists arrived the forested areas that provided habitat for the fur-bearing animals that were the lifeblood of the business were cleared. As long as the fur trade was to be the Company’s primary focus, settlement would never garner wide support among its shareholders or staff.

Then, in 1863 a group calling itself the International Financial Society orchestrated a de facto takeover of Hbc by acquiring a controlling interest. Led by Edward Watkin, the IFS group was a consortium of London banking interests that bought up HBC stock by offering £300 for every £100 of stock – at a time when the market price was £190. The new owners of the Company quickly increased HBC’s market capitalization issuing a prospectus that promised impressive returns by promoting settlement, minerals and a transcontinental telegraph – all based on selling or leveraging the Company’s vast land holdings. The share issue was a roaring success, with most new shareholders expecting a windfall in the short term.

However, the Governor and Committee soon realized that any attempt at promoting settlement would have to wait until there was a functioning civilian government in place. In 1866 this reality sparked a shareholders’ revolt which complicated matters. As events unfolded the Company embarked on negotiations to sell its territories, first to Britain – which didn’t want them – and then to the United Province of Canada, which did not recognize HBC’s claim, and anyways had no means to purchase them.

In the end it was the creation of the Dominion of Canada in 1867 that brought things to a head. The new federal government had an authority the United Province of Canada did not. The stage was set for a deal to be made.

A Blueprint for the Future

The British North America Act (B.N.A. Act) of 1867 established Canada as a self-governing country. In addition to setting forth the respective powers of the federal government and the provinces, it addressed how new provinces might join the federation. Section 146 stated:

It shall be lawful for the Queen … on address from the Houses of the Parliament of Canada and from the Houses of the respective Legislatures of the Colonies or Provinces of Newfoundland, Prince Edward Island and British Columbia, to admit those colonies or Provinces … into the Union, and on address from the Houses of the Parliament of Canada to admit Rupert’s Land and the North-western Territory … into the Union, on such Terms and Conditions in each Case as are … expressed and the Queen thinks fit to approve ...

The following year the British Parliament passed the Rupert’s Land Act“An Act for enabling Her Majesty to accept a Surrender upon Terms of the Lands, Privileges and Rights of ‘The Governor and Company of Adventurers of England trading into Hudson’s Bay’ and for admitting the same into the Dominion of Canada.” That Act set out how the Crown could agree to and accept such a Surrender provided that the terms on which Rupert’s Land might be admitted into Canada had already been agreed between the Crown and Canada. In fact, although legislatively the process of surrender was linear – from HBC to the Crown to Canada – in practice it would be the result of intense trilateral negotiations. And while the events of 1867 provided the necessary impetus to conclude the business, in fact those negotiations had been in the works for quite some time.

In 1821 the Company’s monopoly had been extended for 21 years. The term was renewed for another 21 years in 1838. But as the time to consider a third renewal approached voices of dissent began to be heard where it mattered most: in Britain.

Métis from Red River lobbied hard for self-rule. Meantime HBC was increasingly seen as an anachronism, especially since all of its original ‘peers’, e.g. the British East India Company, had been or were in the process of being wound up. In 1857 a Select Committee of the House of Commons was struck to investigate the Company’s monopoly and trading practices. The Committee examined 25 witnesses and produced over 450 pages of transcripts. Much of the questioning centred on HBC’s attitude to colonization and settlement – an attitude which was ambivalent at best. Witnesses included representatives of the United Province of Canada and the Grand Trunk Railroad, former HBC employee and explorer Dr. John Rae, Richard Blanshard, failed first Governor of the Vancouver Island colony, and Sir George Simpson.

Simpson testified that aside from the existing settlements at Red River, Fort Langley and Victoria, Rupert’s Land was entirely unsuitable for colonization – a position that was disingenuous at best. But the most important – and credible – witness was the one who spoke last: Edward Ellice. Nicknamed “The Bear”, Ellice was a powerful, well-connected businessman who played a highly significant role as a power broker in British politics. His interest in the fur trade went back a long way: he had been instrumental in arranging the merger between HBC and the North West Company in 1821. Now in his seventies, he was asked to appear before the Committee to answer one key question.

Would it be difficult to make an arrangement between Canada and the Company for the extension of settlement into HBC’s territory? Not at all, said The Bear, as long as Canada were to pick up the costs of administration and keep the territory free of competition in the fur trade. And then there was the slight issue of compensation. It was about this time that the figure of £1M began to be mentioned as an appropriate price for Rupert’s Land.

The first page of the Deed of Surrender. The National Archives of the UK, ref.CO42/694

The Committee recommended the immediate relinquishing of HBC’s claims to Vancouver Island and the B.C. mainland and the eventual annexation of Red River and Saskatchewan Districts to Canada. A decade later little had changed other than there was now a legislative framework which would make a surrender possible.

In 1868 Georges-Étienne Cartier and Public Works Minister William Macdougall arrived in London to negotiate for Canada. Sir Edmund Walker Head, Governor of HBC, represented the position of the Company – newly reorganized after its takeover by the International Financial Society. Directing the agenda was new Colonial Secretary Earl Granville, keen to wind up this issue which had confounded his previous three predecessors.

Granville wasted no time. On March 9, 1868 he presented a 12 page ultimatum to both parties which neither found entirely acceptable. When the Canadians finally accepted the terms the die was cast: HBC had no option but to accept.


By the terms of the Deed of Surrender:

  1. HBC would receive £300K in cash compensation from Canada.
  2. HBC would also receive 1/20 of all lands to be surveyed in the Fertile Belt – an area bounded by the 49th parallel, the Rockies, the North Saskatchewan River and the Lake of the Woods/ Winnipeg River waterway.
  3. HBC would receive lands – or reserves – around each of its posts.
  4. HBC was guaranteed the right to continue its trade without hindrance or any special taxation or tariffs.


The second page of the Deed of Surrender. The National Archives of the UK, ref.CO42/694

In order to facilitate the deal Britain agreed to guarantee a loan to Canada for the purchase price.

The Company signed the Deed of Surrender on Nov. 19, 1869. The Canadian government ratified the deal December 1st. Just days later London received word of the North West Rebellion. Jumping the gun, the Canadian government had sent an advance party of surveyors to Red River to measure up its new territory – without even notifying the Métis inhabitants. Ensuing events delayed the finalization of the Deed until the following summer, after Donald Smith had been dispatched by Sir John A. Macdonald to calm things down.

HBC forwarded the executed Deed to the Colonial Office on May 7, 1870. On May 11th Canada’s London representative instructed its bankers to pay the compensation to Hbc which had been on deposit since November. Finally, on June 22nd the Queen accepted the Surrender from HBC. The following day, June 23rd, an Order in Council was passed transferring Rupert’s Land and the North West Territories to Canada, effective July 15th, 1870.

The schedule from the Deed of Surrender. The National Archives of the UK, ref.CO42/694

The effect of the Deed of Surrender was immediate. The Manitoba Act, which had been negotiated in the winter and spring and passed by the Canadian government in May, came into effect the very same day, July 15, 1870. British Columbia would gain its provincial status the very next year. The expansion of the country was underway.

HBC’s land holdings would prove to be immensely lucrative. For the next 50 years profit from the sale of these lands would be the Company’s primary source of revenue. As the region was settled, the company’s business changed inexorably from the fur trade to retail. New immigrants needed a much broader selection of goods. The fur trade retreated northwards in the face of agriculture and a new type of customer and business evolved to take its place.

The Deed of Surrender is a British document, an agreement between a British company and the British Crown. As a result it resides in Britain at the Public Records Office in Kew. But it is second only to the B.N.A. Act in its significance to the country we call Canada. Without the Deed – and the agreement of HBC – the shape of our nation would be very different indeed. Its terms ensured HBC’s future as a retailer and enabled the orderly growth and settlement of the Canadian west. Not bad for a deal that none of the parties thought much of at the time.