In May 1861 Confederate secretary of the navy Stephen Mallory sent James Dunwoody Bulloch, a retired naval officer, to Britain to build or purchase six steamships to serve as commerce raiders and James H. North to purchase two ironclads for use against the Union blockade. By August, Bulloch had begun the construction of two ships, later christened the Florida and the Alabama, and in 1862 the North contracted for the construction of an ironclad ram.
Union agents learned of Bulloch's plans and Adams attempted to prevent the sailing of the Alabama. Russell refused to seize the ship for lack of evidence that its construction violated British neutrality laws. When Adams amassed evidence and a legal opinion to the contrary, Russell sought legal opinion himself and ultimately became convinced that the ship should be detained, but his order to that effect arrived too late to prevent the launching of the Alabama in early August 1862. Captained by Raphael Semmes, the ship wreaked havoc on Union shipping, which after the war became the basis of demands by the United States for massive compensation. After the departure of the Alabama from Britain, Adams and Russell engaged in a rancorous exchange of notes. Adams was determined to prevent future Confederate cruisers from leaving British ports.
Russell ultimately decided that it would better serve British interests if other ships being constructed for the Confederacy did not put to sea. In April 1863 he ordered seizure of the Alexandria, then under construction. Later in the year, following strong protests from Adams and the threat of privateering by the Union, Russell decided to detain rams that Bulloch was having constructed. By 1863 the Confederates had given up hope for recognition and substantial support from Britain. British consuls, whom the Confederate government had allowed to remain at their posts and who initially had written home about Confederate invincibility, had antagonized Confederate officials by their protests on behalf of British subjects being conscripted into the Confederate army. (Seward had gone out of his way to appease British consuls in the North over the same problem.) In October 1863, President Davis expelled all British consuls still at their posts. Two months earlier, on 4 August 1863, Judah Benjamin ordered Mason to close his London mission and to join Slidell in Paris.
Confederate officials had come to the conclusion that their best hope for support lay in Napoléon and France rather than in Palmerston and Britain. Napoléon had taken the initiative, following the failure of the Anglo-French mediation discussions in 1862, in proposing an armistice. In January 1863 he unilaterally proposed mediation, which Seward summarily rejected. During the previous September and October, Slidell successfully concluded a loan of $14.5 million with the French firm Emile Erlanger and Company that allowed Confederate agents used to purchase war materials.
Also, Mallory honored Bulloch's request that he shift operations to Paris, and in April and June 1863 the latter contracted for four commerce raiders and two ironclad rams. Unfortunately for the Confederates, France proved little more hospitable than Britain. Napoléon clearly sympathized with the Confederates, but pressure from Seward and Dayton forced him to prevent the ships from sailing. Napoléon, about to embark on his imperial program in Mexico, had no wish to become embroiled with the Union.
The construction of Confederate naval vessels in Britain and France was not the only issue that created difficulties on the high seas. As the demand for goods rose in both Britain and the Confederacy, success in running the Union blockade became ever more profitable. Similarly, the owners of Union vessels that captured blockade runners could take the ships to prize courts and receive a substantial proportion of the value of condemned prizes. The system led to a number of questionable seizures of not only British ships but also of vessels flying French and Spanish colors. Charles Wilkes continued to create problems after the Trent affair by using neutral ports as bases of operation against ships suspected of intentions to run the blockade. These possibly illegal seizures and violations of international law led to continual protests, legal battles, and ill will. Palmerston, however, saw value in the continual stretching of international law by Americans. They were setting precedents that could be useful to Britain in subsequent conflicts. None of these issues rose above the level of annoyances.