Suez Canal Company

The Universal Maritime Suez Canal

Company (French: Compagnie universelle
du canal maritime de Suez, or simply
Compagnie de Suez for short) was the
corporation that constructed the Suez
Canal between 1859 and 1869 and
operated it until the 1956 Suez Crisis. It
was formed by Ferdinand de Lesseps in
1858, and it owned and operated the canal
for many years thereafter. Initially, French
private investors were the majority of the
shareholders, with Egypt also having a
significant stake.

Compagnie de Suez
Fate Merger with to form
Suez S.A. (1997)
Successor GDF Suez (2008)

Founded 1858

Defunct 1997

Headquarters Ismailia

Key people Ferdinand de Lesseps

(founder)
Sa'id of Egypt (key
funder)
Isma'il Pasha (key
funder)
Participating certificate of the Compagnie Universelle
du Canal Maritime de Suez, issued 1 January 1889

Postcard depicting the Suez Canal Company

headquarters

When Isma'il Pasha became Wāli of Egypt

and Sudan in 1863, he refused to adhere to
portions of the concessions to the Canal
company made by his predecessor Said.
The problem was referred during 1864 to
the arbitration of Napoleon III, who
awarded £3,800,000 (equivalent to
£347 million in 2016)[1] to the company as
compensation for the losses they would
incur by the changes to the original grant
which Ismail demanded. During 1875, a
financial crisis forced Isma'il to sell his
shares to the government of the United
Kingdom for only £3,976,582[2] (equivalent
to £379 million in 2016).[1]

The company operated the canal until its

nationalization by Egyptian President
Gamal Abdel Nasser in 1956, which led to
the Suez Crisis. In 1962, Egypt made its
final payments for the canal to the
Universal Suez Ship Canal Company and
took full control of the Suez Canal.[3] Today
the canal is owned and operated by the
Suez Canal Authority.

In 1997, the company merged with

Lyonnaise des Eaux to form Suez S.A.,
which was later merged with Gaz de
France on 22 July 2008 to form GDF
Suez.[4], which became known as Engie in
April, 2015.

History
The original concession (1854)
The original concession assembled by
Lesseps and granted by Said in 1854
included the following stipulations: 10
percent of the annual profits were reserved
for the founders, 15 percent of the annual
profits were reserved for the Government
of Egypt, and 75 percent of the annual
profits were reserved for shareholders.
There was no stipulation dictating whether
the route of the canal would be direct or
indirect (from the Nile). The company was
given the right to free quarries and import
equipment tax-free.[5]

The second concession (1856)

Following the granting of the first
concession in 1854, Lessups was in near
constant travel to assemble diplomatic
approvals perceived as necessary to build
the canal from other foreign governments
involved. Although the first concession
was granted by Egypt, at the time Egypt
was an administrative subdivision of the
Ottoman Empire, and so Lessups traveled
frequently to the Sublime Porte to make
his case to the Grand Vizier of the sultan,
Ali Pasha. The Ottoman Empire, although
neutral to the idea, were greatly under the
influence of the British at that time. Since
Britain - through the policy of Lord
Palmerston - was largely opposed to the
canal project, and its citizens owned a
potentially competing project in form of a
railroad from Alexandria to Cairo, not to
mention various merchant warehouses
along the African sea route, Lessups made
several trips to Britain between 1854 and
1858 to persuade Palmerston and the
British public. Lessups also had to fight
back against Robert Stephenson's and
even Enfantin's expert opinions on the
feasibility of the canal. Lesseps formed an
organization of international engineers
(the International Commission for the
piercing of the isthmus of Suez) to again
study the canal route in late 1855, and its
results were released to the general public.
In January 1856, Said granted a second
concession to Lessup's company which
replaced the first concession. This
concession defined the canal as a direct
route, but also stipulated a freshwater
canal from the Nile to Lake Timsah. Again,
mining and land rights were included along
with generous tax exemptions. A majority
(4/5ths) of the workers for the company
were required to be supplied from Egypt
and the skilled workers were required to be
paid commensurate with skilled workers
on other Egyptian public works projects.
An amendment stipulated that work could
only commence with the approval of the
Ottoman sultan. The board of
shareholders would have 32 members,
each serving for 8 years. The operations
office would be headquartered in
Alexandria, while administrative offices
would be located in Paris. This company
was called the Universal Company of the
Maritime Canal of Suez.[6]

Initial public offering of shares

(1858)
1858 Suez Canal Company Equity Ownership

As a result of the attempted bombing of

the Emperor of France on January 14,
1858, Lord Palmerston was ousted as the
head of government in England for a year
by public backlash. In late Spring of 1858,
the French Academy of Sciences released
a public report approving of the
engineering plans for the canal. The report
noted that in the previous two decades,
Europeans had spent 12 billion francs
building railroads, and that at a cost of 200
million francs (or 8 million pounds), the
canal was affordable. Lesseps pushed
ahead without formal British or Ottoman
approval. In October of 1858, Lesseps
notified international press and company
agents that 400,000 shares at a price of
500 francs each would be publicly offered
beginning November 5, 1858. In the
notification, Lesseps estimated an annual
revenue of 30 million francs based on
freight fees, and a construction period
lasting 6 years. In preparation for the
offering, shares were sent to brokerage
houses across Europe and in the United
States. At the close of offering on
November 30, 1858, about half of the
shares (around 200,000) belonged to
french citizens with the next largest block
owned by citizens of the Ottoman Empire
(Said bought around 60,000). None of the
shares reserved for Britain, Russia, Austria,
or the United States were bought. Said
purchased the remaining unbought shares
(for a total of 177,000 shares) in order to
ensure that the company reached its
necessary capitalization amount (to
become a legal entity as defined in the
1856 concession). The average number of
shares bought by french citizens
amounted to 9 shares each. Lesseps
declared the company as being officially
formed on December 15, 1858.[7]

Construction (1859-1869)
Mobilization and the Corvée
(1859-1864)

Laborers

Prior to the existence of the Suez Canal,

Port Said and Lake Timsah had few
residents, the Great Bitter Lake was a dry
basin, and drinking water was difficult to
find. In addition to infrastructure
challenges, Said would not allow the use
of massive corvée labor until 1861, when
Napoleon III publicly backed the canal
project. In the meantime from 1859 to
1861, the company's Chief Engineer
Eugène Mougel and its new
superintendent Alphonse Hardon, planned
for and built fresh water distilleries along
the route, hauled in additional fresh water
from the Nile, built housing for workers,
gathered stone for the jetty, assembled
some aging dredging equipment from the
Nile, and looked for workers. Company
town establishments arose along the
route. In 1860, the company employed 210
Europeans and 544 Egyptians along 11
stations of the route. Employees were
provided scrip to buy provisions. Plans
were made for an access canal from the
Nile to Lake Timsah to provide fresh water.
Once the necessary infrastructure was
established, the plan was to build an 8-
meter wide access canal from Port Said to
Lake Timsah and later from Lake Timsah
to the Red Sea with the aid of blasting.
After the use of corvée labor was
approved in 1861, work proceeded south
from Lake Manzala with, at its height,
60,000 fellahin hand digging the canal.
Guards were used to watch over the
fellahin, although a large number of guards
were not required due to the remote
location and nearby hostile Bedouins. At
the same time, the freshwater canal was
being dug easterly to Lake Timsah. At the
end of 1862, the access canal connecting
Lake Timsah to the Mediterranean Sea
was complete. François Philippe Voisin
became chief engineer in January 1861
and Hardon's contract expired at the end
of 1862. Compared with the later
mechanised excavation, a low amount of
material was excavated during this phase
of construction. The British began to
loudly decry the use of corvée labor in
1862.[8]

Said's death and political

ramifications
Ottoman Empire in 1862

Said died in mid-January 1863, and in late-

January, just before Ismail began the
process of establishing himself as the new
viceroy of Egypt by Ottoman Sultan Abdul
Aziz, Ismail declared that he was
establishing reforms in the ways of the
creation of a civil service list and the
abolishment of corvée labor. Ismail's
motives had to do with his own personal
projects (cotton farms, whose export from
Egypt had been increasing since the
beginning of the American Civil War, and
other cash crops and public works) within
Egypt and with limiting the company's
power. Ismail would soon issue a
clarification that corvée labor could still be
used for public works essential for the
common good (though not on the Suez
Canal project). The British also
commented on the use of forced labor by
the company. Ismail issued declarations
upholding much of the previous
concessions, with exceptions including the
labor issue. Aziz favored the end of the
use of the corvée and the return of land
from the company to Egypt. Arbitration
was referred to the Emperor of France.
Ismail authorised Boghos Nubar Nubarian
to negotiate on behalf of Egypt, and Nubar
in turn allied with Emile Ollivier and Morny
against Lessups and the company. It
wasn't until July of 1864 that Napoleon III
released a ruling for the framework for
resolution which accepted the 1856
concession as a binding contract, ended
the use of corvée labor, placed the land
grants back into the hands of the Egyptian
government, but called for remuneration of
84 million francs to the Suez Canal
Company for violation of the labor and
land agreements. Ismail received a loan
from the Oppenheim brothers for nearly
100 million francs.[9]

Meanwhile, the progress of the canal

construction proceeded slowly from 1863-
1864. By February of 1864, the corvée had
finished the access canal from Lake
Timsah to the Red Sea.[10]

Mechanical Dredging (1864-1869)

Construction trains
Photo of a dredge machine taken between 1865 and
1890

Photo of a dredge machine taken circa 1870

Chalufa ridge work

1869 Inauguration

After Napoleon III's decree in Summer of

1864, the use of corvée labor was
restricted. The use of large mechanical
dredging machines began to excavate the
main canal. In December of 1863, Voisin
hired Paul Borel and Alexandre Lavalley's
company, Borel, Lavalley, and Company, to
design, build, and operate the dredging
and excavation machines to finish the
canal. Borel and Lavalley, like many of the
engineers working on the project, were
École Polytechnique alumni. These
machines were powered by steam from
coal in an era before the mass production
of machines and machine tools. The men
had prior railroad experience and Lavalley,
in particular, had customised locomotives,
designed lighthouses on the Black Sea,
created a tunnel boring machine in
Lithuania, and created a machine to
dredge ports in Russia. Railroad tracks
were laid along the canal route to
accommodate some of the machines,
whereas others were mounted to barges.
The varying soil type necessitated more
than a dozen different types of excavation
machinery. Nearly 300 of these machines
were used in this 5 year dredging period.
Their subcontractor excavation price was
determined on a price-per-unit basis -
francs per cubic meter - which was further
varied depending upon the soil type they
excavated. Ultimately, Borel, Lavalley, and
Company removed 75% of the 74 million
cubic meters excavated from the main
canal. And most of that work was done
between 1867 and 1869.[11] Another
French contractor, Alphonse Couvreux,
who is credited with the first documented
use of a bucket chain excavator on land,
employed seven of his excavators to dig
about 8 million cubic yards of material
from 1863 to 1868.[12]

During this same period, the jetties for Port

Said were also constructed by the
Dussaud brothers. They created two jetty
structures, one at 1.5 miles in length, and
the other at 2 miles in length, by dumping
20-ton concrete blocks in the
Mediterranean Sea. The blocks were
produced in an assembly line with
mechanical elevators to pour in cement,
lime, and water. After curing for two
months in wooden frames, they were lifted
on to barges that dropped them into the
sea. 30,000 blocks were used in the
jetties.[13]

In 1867, the company began to develop its

fee structure in preparation for opening.
During this same year the company had
already started to charge fees for
transport of goods across the northern
almost-completed portion to the separate
southern access canal, garnering millions
of francs in annual revenue. The company
estimated that of the 10 million tons of
annual goods shipped around the Cape of
Good Hope, half would pass through the
canal. After some complaints, a figure of
10 francs per ton and 10 francs per
passenger was announced.[14]

Politically during this period, company

workers experienced a cholera outbreak in
1865 that caused the deaths of several
hundred Europeans, including Voisin's wife,
and more than 1,500 Arabs and Egyptians.
The Ottoman sultan approved of the
French reconciliation framework in 1866.
By 1866 there were about 8,000 Europeans
and 10,000 Arab and Egyptians that had
settled in the canal region. By 1867 and
1868 the total population in the canal
region would grow to 26,000 and 34,000,
respectively. As the diversity and number
of settlers in the canal region rose, Ismail
directed Nubar to begin his decade-long
journey of revising the judicial system
from a system of capitulations to a system
of mixed tribunals. The company made an
appeal at the 1867 Universal Exposition of
Art and Industry to attempt to sell an
additional 100 million francs (4 million
pounds) worth of debt in the form of
bonds - maturing in 50 years - to finish the
project. Remaining unsold bonds were
sold in lotteries approved by the French
government.[15]

Two dams prevented the filling of the

Great Bitter Lake and thus the completion
of the canal, one to the north and one to
the south. Rocky terrain was cleared on
the Serapeum ridge to the north of the lake
for a lake filling ceremony witnessed by
Ismail in early 1869. The prince of Wales
visited in the Spring of 1869 shortly after
the initial lake filling ceremony but while
the lake was still filling and toured the
canal zone. The prince of Wales stayed in
a chalet in Ismailia while in the region. The
southern dam in the rocky Chalufa ridge
would not connect the Red Sea with the
Mediterranean Sea until it was broken on
August 15, 1869. Prior to that, hand
digging was used to remove soil in the
remaining 10 miles between Suez and the
southern dam. The average final width of
the canal was 200 feet - 300 feet at the top
with a depth of at least 26 feet.[16]

The company and Ismail set aside 1

million francs for the inauguration of the
canal on November 17, 1869. One
thousand guests were invited for a tour
upon opening. The empress Eugénie and
Ismail were a major attraction. The
multinational flotilla of about 60 ships
proceeded south from Port Said to
Ismailia, where a large expenses-paid
festivity took place including: a riding
exhibition, a rifle competition, tight-rope
walking, an Armenian with a dancing bear,
an Italian with a hurdy-gurdy, Arab sword
dancing, glassblowing, flame eating, snake
charming, juggling, dancing darvishes,
belly dancers, Koran recitations, Arabic
poetry recitations, prostitution, food, and
drink. On November 19th, the flotilla
proceeded south to Suez.[17]

In summary, the total construction cost of

the canal, according to Lessups'
autobiographical account, was 11,627,000
pounds.[18] This cost was more than
covered by the initial equity capitalization
of 8 million pounds (1858), a legal
decision rewarding about 4 million pounds
(1864 and 1866), and a bond issuance of 4
million pounds (1867).

First two decades of operation

(1870-1890)

Approximately 500 ships carrying around

400,000 tons made passage through the
canal in 1870, which was much less than
the 5 million tons projected in 1867. Of
that tonnage, three-quarters came from
Britain. In 1871, more tonnage made the
passage, but it was still less than 1 million
tons.[19] The ship tonnage for 1872, 1873,
and 1874 was 1,439,000, 2,085,000, and
2,424,000, respectively.[20]
Toll revenue from the first five years (1870-
1874) are as follows: 206,373 pounds,
359,747 pounds, 656,305 pounds, 915,853
pounds, and 994,375 pounds.[21]

In 1873, Ismail borrowed 30 million

pounds (more than double the cost of the
canal) to continue building other
infrastructure in Egypt. By 1875, the
Egyptian treasury was 100 million pounds
in debt, and no lender would issue Ismail
money to pay for the December debt
installment of several million pounds.
Société Générale was interested in his
shares of the Suez Canal Company in
exchange for paying off the debt
installment, however, the British prime
minister Benjamin Disraeli responded
quickly and with permission from
parliament and Queen Victoria received a
loan from Lionel de Rothschild in the
amount of 4 million pounds to purchase
the 177,000 shares from Ismail on behalf
of the British government. This offer was
slightly greater than the French offer, and
Ismail physically delivered his share
certificates to the British consulate. By
December 1875 Britain became the largest
shareholder of the Suez Canal Company,
owning 44 percent of the shares.[22]
However, the remaining 56% of the
company's shares remained under the
ownership of French shareholders.[23]

In 1876, Ismail again faced government

debt payment issues and was forced to
join an international commission which
would govern Egypt's finances known as
Dual Control. As a condition of joining the
commission, the khedive's right to 15
percent of the commissions from Suez
Canal traffic was sold. The buyer was a
french bank and the price was 22 million
francs.[24]

In 1879, Ismail was deposed by the

Ottoman sultan and replaced with Tawfiq.
Tawfiq was challenged for leadership
during a nationalist uprising in 1880 by
Colonel Ahmad Urabi. In response to an
anti-european riot in 1882, Britain landed
an army, seized the canal, and developed a
protectorate over Egypt, placing Lord
Cromer as the head governing authority.[25]

The 1888 Convention of Constantinople

declared the canal a neutral zone under
British protection.[26] The agreement went
into effect in 1904, the same year as the
Entente cordiale between Britain and
France

World War I through the 1930s

British Empire in 1921

The British assigned more than 100,000

troops to the canal during the first world
war. The canal was used to help stage T.E.
Lawrence and Faisal's Arab revolt during
the war against the Ottomans. Egypt was
declared an independent country in 1922,
however, Britain still asserted a right to
defend the canal and stationed troops
there for that purpose into the 1930s. The
company's profits rose greatly during the
1920s and 1930s.[27]
World War II through the 1990s

Britain secured the canal against the

Germans and their Afrika Korps during the
second world war. Immediately following
the end of the second World War, company
profits rose greatly due to petroleum
shipments and the company reserved
much of this income. By 1952, the
company held four different reserves
accounts: a statutory reserve of 430
million francs, a special reserve of 7 billion
francs, a contingency fund of 1.72 billion
francs, and a pension fund of 7.81 billion
francs. After Jacques Georges-Picot's
arrival to the company in the 1940s, the
board started to hire investment advisors,
and by the late 1940s, the company had
investments in Air France, Air Liquide,
colonial sugar refineries, coal mining
companies, railroad companies, electric
companies, the African forest and
agriculture Society, and the Lyonnaise de
Madagascar.[28] King Farouk of the
Muhammad Ali line was overthrown in a
military coup in 1952 and Colonel Gamal
Abdel Nasser eventually emerged as the
leader of Egypt. By the mid-1950s, canal
traffic reached 122 million tons annually,
over half of which was oil shipments. In
response to the World Bank denying a loan
to build a dam across the Nile at Aswan,
Nasser declared on July 26, 1956 that
Egypt was nationalizing the canal. In
response, Britain, France, and Israel
attacked Egypt and destroyed large
portions of Port Said. The canal was
returned to Egypt after the United States
disapproved of the action. For the
following ten years, the canal was
operated by Egypt who paid an amount to
the Suez Canal Company for its use. In
1967, another war with Israel arose and
the canal was made impassable with
scuttled ships. The canal would not reopen
until 1975 after the Camp David Accord.
Traffic through the canal began to fall in
the early 1980s after petroleum pipelines
eroded ship traffic business. After the
company became defunct in the late
1990s, the canal was generating $2 billion
a year in revenue for Egypt.[29]

Disputes
The company has been involved in
numerous disputes starting with its
founding negotiations and continuing to
various 20th century wars. These disputes
include the first (1854) and second
concessions (1856), the use of corvée
labor (1863-1866), land rights (1863-1866),
general British opposition throughout its
conception and construction (1854-1869),
Dual Control (1876), British occupation in
1882, the Convention of Constantinople
(1888), World War I through World War II
British protection (1914-1945), Egyptian
nationalization and the Suez Crisis (1956),
and the 8-year closure starting with the
Six-Day War (1967-1975).

In 1938, Benito Mussolini demanded that

Italy have a sphere of influence in the Suez
Canal, specifically demanding that an
Italian representative be placed on the
company's board of directors.[30] Italy
opposed the French monopoly over the
Suez Canal because under French
domination of the company all Italian
merchant traffic to its colony of Italian
East Africa was forced to pay tolls upon
entering the canal.[30]

On 26 July 1956, the Egyptian government

announced it intended to nationalise the
Suez Company, owned by the French and
the British, and also closed the canal to all
Israeli shipping. This resulted in the Suez
Crisis.

Founders
In Lessups' original concession (1854),
founders of the company were to receive
10 percent of the canal's profits. These
members included[31]
François Barthélemy Arlès-Dufour
Louis Maurice Adolphe Linant de
Bellefonds
Richard Cobden
Barthélemy Prosper Enfantin
Benoît Fould
Lesseps and multiple members of his
family
Eugène Mougel
Dutch Consul General Ruyssenaers
French Consul General M. Sabatier
Sa'id of Egypt and multiple members of
his family
The Talabot brothers
 Members of the chambers of commerce
of Lyon and Venice

Presidents of the Suez Canal

Company (1855-1956)
Before nationalisation:

Ferdinand De Lesseps, (1855 – 7

December 1894)
Jules Guichard (17 December 1892 – 17
July 1896) (acting for de Lesseps to 7
December 1894)
Auguste-Louis-Albéric, prince d'Arenberg
(3 August 1896 – 1913)
Charles Jonnart (19 May 1913 – 1927)
 Louis de Vogüé (4 April 1927 – 1 March
1948)
François Charles-Roux (4 April 1948 –
26 July 1956)

Administrator of the Suez

Canal Company
Marie Gabriel Adolphe Peghoux[32]

See also
1948 Arab–Israeli War
Emancipation reform of 1861
Franco-Prussian War
GDF Suez
Khedivial Opera House
 Panic of 1873
Port Said Lighthouse
Suez Environnement
Suez S.A.
Yellow Fleet

References
1. United Kingdom Gross Domestic
Product deflator figures follow the
Measuring Worth "consistent series"
supplied in Thomas, Ryland;
Williamson, Samuel H. (2018). "What
Was the U.K. GDP Then?" .
MeasuringWorth. Retrieved 5 January
2018.
 2. Stokes.
3. About.
4. Patel.
5. Karabell, p. 79.
6. Karabell, pp. 106-123.
7. Karabell, pp. 132-144.
8. Karabell, pp. 154-180.
9. Brown, pp. 116-137.
10. Karabell, pp. 182-204.
11. Karabell, pp. 208-210.
12. Keith Haddock. Giant Earthmovers :
An Illustrated History . MotorBooks
International. pp. 173–174. ISBN 978-
1-61060-586-1.
13. Karabell, pp. 210-211.
14. Karabell, p. 239.
15. Karabell, pp. 211, 217-225,234,236.
16. Karabell, pp. 233, 241, 243, 250.
17. Karabell, pp. 246, 252, 256-257.
18. Fitzgerald, p. 66.
19. Karabell, p. 260.
20. Fitzgerald, p. 87.
21. Fitzgerald, p. 96.
22. Karabell, pp. 262-264.
23. "An International Company in Egypt:
Suez, 1856-1956" (PDF). European
Business History Association.
24. Karabell, p. 265.
25. Karabell, pp. 265-266.
26. "Suez Canal" . Egyptian State
Information Service. Archived from
the original on 20 February 2007.
Retrieved 18 March 2007.
27. Karabell, p. 268.
28. EBHA, pp. 12,13.
29. Karabell, pp. 268-270.
30. Life, p. 23.
31. Karabell, pp. 81-82.
32. Revue, p. 152.

Sources
Brown, Nathan J. (1994). "Who
abolished corvée labour in Egypt and
why?". Past & Present. 144.
"European Business History Assocation
2007 Research Paper Webpage" (PDF).
ebha.org. 2007. Retrieved 19 November
2018.
Fitzgerald, Percy (1876). "The Great
Canal at Suez (Volume II)" . Tinsley
Brothers. Retrieved 19 November 2018.
"French Army breaks a one-day strike
and stands on guard against a land-
hungry Italy". Life. 19 December 1938.
Karabell, Zachary (2003). Parting the
desert: the creation of the Suez Canal.
Alfred A. Knopf. ISBN 0-375-40883-5.
 Patel, Tara (22 July 2008). "GDF Suez
Shares Fall in Debut Following Merger" .
Bloomberg. Retrieved 22 July 2008.
Revue d'Auvergne. 5. Missing or empty
|title= (help)
"Suez Canal Connects the Red Sea with
the Mediterranean Sea" . About.com.
"Stokes Autobiography" . Archived from
the original on |archive-url=
requires |archive-date= (help).

|archive-date=May 28,2009
|ref=CITEREFStokes }}

External links
 Wikimedia Commons has media
related to Suez Canal Company.

Statutes of the Company on Google

Books, in French
English translation of the Statutes
Suez corporate web site
Sir John Stokes' view of the British
acquisition of 40%

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