Bunch had issued to Mure a paper which the latter regarded as a passport, as did the United States. This also was made matter of complaint by Adams, when on September 3 the affair was presented to Russell. America complained of Bunch on several counts, the three principal ones being (1) that he had apparently conducted a negotiation with the Confederacy, (2) that he had issued a passport, not countersigned by the Secretary of State as required by the United States rules respecting foreign consuls, (3) that he had permitted the person to whom this passport was issued to carry letters from the enemies of the United States to their agents abroad. On these grounds the British Government was requested to remove Bunch from his office. On first learning of Mure's arrest Lyons expressed the firm belief that Bunch's conduct had been perfectly proper and that the sealed bag would be found to contain nothing supporting the suspicion of the American Government[356]. The language used by Lyons was such as to provide an excellent defence in published despatches, and it was later so used. But privately neither Lyons nor Russell were wholly convinced of the correctness of Bunch's actions. Bunch had heard of Mure's arrest on August 18, and at once protested that no passport had been given, but merely a "Certificate to the effect that he [Mure] was a British Merchant residing in Charleston" on his way to England, and that he was carrying official despatches to the Foreign Office[357]. In fact Mure had long since taken out American citizenship papers, and the distinction between passport and certificate seems an evasion. Officially Lyons could report "it is clear that Mr. Robert Mure, in taking charge of the letters which have been seized, abused Mr. Bunch's confidence, for Mr. Bunch had positive instructions from me not to forward himself any letters alluding to military or political events, excepting letters to or from British officials[358]." This made good reading when put in the published Parliamentary Papers. But in reality the sending of private letters by messenger also carrying an official pouch was no novelty. Bunch had explained to Lyons on June 23 that this was his practice on the ground that "there is really no way left for the merchants but through me. If Mr. Seward objects I cannot help it. I must leave it to your Lordship and H.M.'s Government to support me. My own despatch to Lord J. Russell I must send in some way, and so I take the responsibility of aiding British interests by sending the mercantile letters as well[359]." And in Bunch's printed report to Lyons on Mure's arrest, his reply as to the private letters was, "I could not consider him [Mure] as being disqualified from being the bearer of a bag to Earl Russell, by his doing what everyone who left Charleston was doing daily[360]...."

Officially Lyons, on September 2, had reported a conversation with Belligny, the French Consul at Charleston, now in Washington, writing, "I am confirmed in the opinion that the negotiation, which was difficult and delicate, was managed with great tact and good judgment by the two Consuls[361]." But this referred merely to the use of Trescott and its results, not to Bunch's use of Mure. The British Government was, indeed, prepared to defend the action of its agents in securing, indirectly, from the South, an acknowledgment of certain principles of international law. Russell did not believe that Lincoln was "foolhardy enough to quarrel with England and France," though Hammond (Under Secretary of Foreign Affairs) "is persuaded that Seward wishes to pick a quarrel[362]." Enquiry was promptly made of France, through Cowley, as to her stand in the matter of the consuls at Charleston, Russell intimating by an enquiry (later printed in the Parliamentary Papers), as to the initiation of the Declaration of Paris negotiations, that it was Thouvenel who had first suggested the approach to the South through the Consuls[363]. This was an error of memory[364], and Cowley was perturbed by Thouvenel's reticence in reply to the main question. The latter stated that if a like American demand were made on France "undoubtedly he could not give up an Agent who had done no more than execute the orders entrusted to him[365]." This looked like harmony, but the situation for the two countries was not the same as no demand had been made for the recall of Belligny. Cowley was, in reality, anxious and suspicious, for Thouvenel, in conversation, attributed Seward's anger to Bunch's alleged indiscretions in talk, and made it clear that France would not "stand by" unless Seward should protest to France against the fact of a communication (not a negotiation) having been held with the Confederacy[366]. Before the French reply was secured Russell had prepared but not sent an answer to Adams, notifying him that the bag from Bunch, on examination, was found not to contain "correspondence of the enemies of the Government of the United States" as had been suspected, and transmitting a copy of Bunch's explanation of the reason for forwarding private letters[367]. In another letter to Adams of the same date Russell avowed the Government's responsibility for Bunch's action on the Declaration of Paris, and declined to recall him, adding:

"But when it is stated in a letter from some person not named, that the first step to the recognition of the Southern States by Great Britain has been taken, the Undersigned begs to decline all responsibility for such a statement.
"Her Majesty's Government have already recognized the belligerent character of the Southern States, and they will continue to recognize them as belligerents. But Her Majesty's Government have not recognized and are not prepared to recognize the so-called Confederate States as a separate and independent State[368]."

Adams received Russell's two notes on September 13[369], and merely stated that they would be despatched by the next steamer. That Russell was anxious is shown by a careful letter of caution to Lyons instructing him if sent away from Washington "to express in the most dignified and guarded terms that the course taken by the Washington Government must be the result of a misconception on their part, and that you shall retire to Canada in the persuasion that the misunderstanding will soon cease, and the former friendly relations be restored[370]." Meantime Russell was far from satisfied with Bunch, writing Lyons to inform him that the "statements made in regard to his proceedings require explanation[371]." The failure of Seward to demand Belligny's recall worried Russell. He wrote to Palmerston on September 19, "I cannot believe that the Americans, having made no demand on the French to disavow Belligny, or Baligny, will send away Lyons," and he thought that Seward ought to be satisfied as England had disavowed the offensive part of Bunch's supposed utterances. He was not in favour of sending reinforcements to the American stations: "If they do not quarrel about Bunch, we may rest on our oars for the winter[372]." There was nothing further to do save to wait Seward's action on receipt of the British refusal to recall Bunch. At this moment Lyons at Washington was writing in a hopeful view of "avoiding abstract assertions of principles," but accustoming the North to the practice of British recognition of Southern belligerent rights[373]. Lyons believed that Seward would not go further than to withdraw Bunch's exequatur, but he was anxious for the return of Mercier (long absent with Prince Napoleon), since "our position is unluckily not exactly the same with that of France[374]." On October 12 Lyons conferred at length with Seward on the Bunch matter, as usual, privately and unofficially. Seward dwelt on a letter just received from Motley assuring him that Great Britain was not "unfriendly to the United States," and "appeared anxious not to pick a quarrel, yet hardly knowing how to retract from his original position." Lyons told Seward that it would be "impossible to carry on the Diplomatic business ... on the false hypothesis that the United States Government" did not know England and France had recognized the belligerent rights of the South, and he urged Russell to get from France an open acknowledgment, such as England has made, that she "negotiated" with the Confederacy. Lyons thought Mercier would try to avoid this, thus seeking to bring pressure on the British Government to adopt his plan of an early recognition of Southern independence. Like Cowley, Lyons was disturbed at the French evasion of direct support in the Bunch affair[375].

Bunch's formal denial to Lyons of the charges made against him by the United States was confined to three points; he asserted his disbelief that Mure carried any despatches from the de facto government at Richmond; he protested that "there was not one single paper in my bag which was not entirely and altogether on Her Majesty's service"; and he explained the alleged "passport" was not intended as such, but was merely "a certificate stating that Mr. Mure was charged by me with despatches," but he acknowledged that in the certificate's description of Mure as a "British merchant" a possible error had been committed, adding, however, that he had supposed anyone would understand, since the words "British subject" had not been used, that Mure was in reality a naturalized citizen of America[376]. This explanation was received by Russell on October 21. Lyons' comment on Bunch's explanation, made without knowledge of what would be Seward's final determination, was that if Bunch had any further excuses to make about the private letters carried by Mure he should drop two weak points in his argument. "I mean the distinction between B. merchant and B.S., and the distinction between a document requesting that the bearer 'may be permitted to pass freely and receive all proper protection and assistance' and a passport[377]." Russell, on receipt of Bunch's explanation was also dissatisfied, first because Bunch had violated Lyons' instructions against entrusting despatches to persons carrying private correspondence, and second, because Bunch "gives no distinct denial" to the newspaper stories that he had gossiped about his activities and had stated them to be "a first step toward recognition[378]." These criticisms were directed entirely to Bunch's conduct subsequent to the overture to the South; on the propriety of that act Russell supported Bunch with vigour[379]. October 26, Seward read to Lyons the instruction to Adams on the revocation of Bunch's exequatur. The ground taken for this, reported Lyons, was an evasion of that charge of communicating with the South for which Russell had avowed responsibility, and a turning to the charge that Bunch was personally unacceptable longer to the United States because of his partisanship to the South, as evidenced by various acts and especially as shown by his reported assertion that Great Britain had taken "a first step to recognition." "Never," wrote Lyons, "were serious charges brought upon a slighter foundation." "No one who has read Mr. Bunch's despatches to your Lordship and to me can consider him as in the least degree a partisan of the Southern cause." "When Mr. Seward had finished reading the despatch I remained silent. After a short pause I took leave of him courteously, and withdrew[380]."

As will have been noted, Lyons had foreseen the American decision against Bunch on purely personal grounds, had been relieved that this would be the issue, and had fore-warned Russell. His despatch just cited may be regarded as a suggestion of the proper British refutation of charges, but with acceptance of the American decision. Nevertheless he wrote gloomily on the same day of future relations with the United States[381]. At the same time Russell, also foreseeing Seward's action, was not disturbed. He thought it still "not off the cards that the Southern Confederates may return to the Union.... Our conduct must be strictly neutral, and it will be[382]." Upon receipt of Lyons' despatch and letter of October 28 Russell wrote to Palmerston, "I do not attach much importance to this letter of Lyons. It is the business of Seward to feed the mob with sacrifices every day, and we happen to be the most grateful food he can offer[383]." For Russell saw clearly that Great Britain could not object to the removal of Bunch on the purely personal grounds alleged by Seward. There followed in due course the formal notification by Adams on November 21, just six days before he learned of the Trent affair, which had occurred on November 8. That alarming incident no doubt coloured the later communications of both parties, for while both Adams and Russell indulged in several lengthy argumentative papers, such as are dear to the hearts of lawyers and diplomats, the only point of possible further dispute was on the claim of Great Britain that future occasions might arise where, in defence of British interests, it would be absolutely necessary to communicate with the Confederacy. Adams acknowledged a British duty to protect its citizens, but reasserted the American right to dismiss any British agent who should act as Bunch had done. On December 9, Russell closed the matter by stating that he did "not perceive that any advantage would be obtained by the continuance of this correspondence[384]." Bunch was expected to leave Charleston as soon as a safe conveyance could be provided for him, but this was not immediately forthcoming. In fact he remained at Charleston until February, 1863, actively engaged, but official papers were signed by his vice-consul. In the excitement over the Trent, he seems rapidly to have disappeared from the official as he did from the public horizon[385].

The Bunch controversy, seemingly of no great importance in so far as the alleged personal grounds of complaint are concerned, had its real significance in the effort of Great Britain to make contact with the Southern Government--an effort incautiously entered upon, and from which an attempt to withdraw had come too late. The result was British assertion of a right in case of necessity to make such contact, having recognized the South as a belligerent, but a discontinuance of the practice, under the American protest[386]. While this controversy was in progress the attention of the British Government was directed to a proposal urged by Mercier upon Lyons in Washington, which appeared to have the support of the French Government. On September 30, Mercier, so Lyons reported, had received a private letter from Thouvenel expressing great concern over the prospective scarcity of cotton from America, due to the blockade, and asking Mercier's advice. The latter now informed Lyons that his reply had outlined the following steps: first, complete harmony of action between England and France; second, recognition of Southern independence; third, refusal longer to recognize the blockade; fourth, England and France to be alert to seize the "favourable moment," when the North became disheartened, the present moment not being a good one[387]. This policy Mercier thought so "bold" that the North would be deterred from declaring war. The two diplomats held long argument over this suggestion. Lyons acknowledged the general pressure for cotton, but thought there was no need of great alarm as yet and also advanced the idea that in the end Europe would benefit by being forced to develop other sources of supply, thus being freed from such exclusive dependence on the United States. Mercier answered that France was in dire need and could not wait and he urged that mere recognition of the South would not secure cotton--it was necessary also to break the blockade. In comment to Russell, Lyons agreed that this was true, but thought the fact in itself an argument against accepting Mercier's ideas: "The time is far distant when the intervention of England and France in the quarrel would be welcomed, or, unless under compulsion, tolerated by the American peoples." The South had not yet "gone far enough in establishing its independence to render a recognition of it either proper or desirable for European powers," and he stated with emphasis that recognition would not end the war unless there was also an alliance with the South[388].

In the British Cabinet also, at this same time, attention was being directed to the question of cotton, not, primarily, by any push from the British manufacturing interest, but because of queries addressed to it by the French Minister in London. Russell wrote to Palmerston, referring to the inquiry of Flahault, "I agree with you that the cotton question may become serious at the end of the year," but he added that Lindsay had informed him that in any case cotton could not be brought in the winter-time from the interior to the Southern ports[389]. In truth any serious thought given at this time to the question of cotton appears to be the result of the French arguments at London and Washington advocating a vigorous American policy. October 19, Lyons and Mercier renewed debate on exactly the same lines as previously, Mercier this time reading to Lyons an instruction from Thouvenel and his reply. Lyons insisted that the North would most certainly declare war on any power that recognized the South and asserted that such a war would cause more suffering many times than all the suffering now caused by the shortage of cotton. Yet Lyons felt compelled to use caution and conciliation in dealing with Mercier, because of the desire to preserve close harmony of attitude[390]. A few clays later Lyons' comments seemed wholly justified when Mercier reported to him the tone of a conversation with Seward, after having left with him a copy of Thouvenel's instruction. Seward said plainly that the United States would go to war with any foreign power that tried to interfere and that the only way in which France could get cotton was by a Northern conquest of the South. He acknowledged that the United States might be defeated, but he informed Mercier that France would at least know there had been a war. On his part Mercier told Seward that in his opinion there was but one possible outcome in America--separation--and that he had advised Thouvenel that the true policy of England and France was to recognize the South and "bring about a peaceful separation." Lyons' comment to Russell is that Seward had certainly taken a "high" tone--evident justification of Lyons' previously expressed opinion. Seward had been very eager to learn whether England knew of Thouvenel's instruction, to which Mercier replied "no," and was now anxious that Russell should not reveal to Adams that Lyons had known the contents before delivery to Seward--a caution with which Lyons was very content[391].

Lyons' first report of Mercier's ideas had been received in London at a rather critical moment. On October 17, just after Adams' complaint about Bunch and Russell's answer, while waiting to see whether Seward would magnify that incident into a cause of rupture, and four days before Bunch's "unsatisfactory explanation" had been received, Russell wrote to Palmerston:

"There is much good sense in Mercier's observations.
But we must wait. I am persuaded that if we do anything,
it must be on a grand scale. It will not do for England
and France to break a blockade for the sake of getting
cotton. But, in Europe, powers have often said to belligerents,
Make up your quarrels. We propose to give terms
of pacification which we think fair and equitable. If you
accept them, well and good. But, if your adversary accepts
them and you refuse them, our mediation is at an end,
and you may expect to see us your enemies. France would
be quite ready to hold this language with us.
"If such a policy were to be adopted the time for it
would be the end of the year, or immediately before the
meeting of Parliament[392]."