URSABLOG: Champagne Trades

I have to confess if I have one guilty pleasure it is Champagne. I love the taste and the smell, the bubbly effervescence as it tickles the nose and the back of the throat, the lightness, even the way it makes me slightly merry in a more alive way. Opening the cork is an event in itself, and it is fantastic at celebrations; it is also perfect with shellfish and caviar. I have been known to open a bottle on my own in celebration of a private victory, methodically working my way through the bottle and a dozen oysters – in all their glorious rawness – all by myself. I am not alone: enthusiasm for Champagne is universal and eternal, which explains its longevity and price. It is one of our world’s very good things, and no one can convince me otherwise.

Before the blessed méthode was invented, the region of Champagne was also a big deal, particularly around the 12th and 13th centuries. Champenoise towns like Troyes, Provins, Lagny, and Bar-sur-Aube in today’s north-eastern France formed hubs in a massive European trading network, where innovations in commerce, finance and practical law left their mark and are still felt today.

The fairs were held in the different towns at specified times of the year, trading various valuable commodities: textiles (including top of the range Flemish wool cloth), silks and spices from the East, furs, leather, dyes, metals, jewellery and other luxury goods. The markets attracted Italian merchant bankers from Genoa, Pisa, and Florence, Flemish cloth traders, German metal and fur dealers, Mediterranean and Byzantine traders, and Spanish leather and wool merchants, as well as buyers from all over Europe.

Apart from providing buyers and sellers, the Counts of Champagne created an unusually secure commercial and trading environment. They offered safe-conduct guarantees for merchants, special courts for commercial disputes, standardised weights and measures, and protection from feudal toll and tariff chaos. For medieval traders – used to fragmented jurisdictions – this was revolutionary, and welcome.

The fairs were laboratories for new financial practices: Italian merchants began using bills of exchange (early international payment systems), credit clearing systems and currency conversion mechanisms, avoiding the need, danger and cost of hauling sacks of silver across Europe, and in the meantime developing a pan-European credit-based trading system.

Due to the diversity of merchants from different regions in Europe and beyond, the fairs set up their own rules. It was from here that lex mercatoria – merchant law – developed, with the establishment of predictable dispute resolution with fast decisions in dedicated courts, methods of contract enforcement, and a general system of transnational commercial law. These laws were not laid down by royalty or the church; they were created by the merchants themselves.

But this is not the full story: conventions, etiquettes and networks flourished. Because the merchants met repeatedly at predictable places and times – and formed relationships with people over time and space – trust networks formed and information flowed faster, particularly the kind of information all markets need: prices, politics and risks.

These innovations had nothing really to do with the goods themselves; the real innovations were in the system that made trading more efficient, and the trust needed to keep the network functional and lubricated. Having only recently stumbled on the existence of the Champagne fairs, I have noticed similarities between them and the tramp shipping market of the last couple of hundred years, and this resemblance isn’t superficial.

At the Champagne fairs there were many buyers and many sellers, with many different goods with different individual characteristics, transactions were negotiation heavy, with constant information flow, and even if merchants arrived knowing kind of what they wanted, real price discovery was only reached through conversations. The “market” existed because people gathered repeatedly in the same commercial ecosystem.

Intermediaries – factors, agents, translators, money changers – even if they were not themselves traders were essential, because they facilitated deals, matched parties, reduced friction, and disseminated the necessary information. These intermediaries’ word had to carry weight however: reputations were important, and an ability to perform was crucial.

The deals evolved in stages:

–           Initial approach

–           Bargaining over quantity, quality, price

–           Conditional agreement

–           Final confirmation during settlement phase

Risk was allocated, with mechanisms to manage uncertainty without eliminating it:

–           Inspection periods before final settlement

–           Payment delays tied to later fairs

–           Quality disputes resolved quickly by intermediaries and merchant courts

Legally, the fairs relied heavily on merchant norms:

–           Timing flexibility

–           Good-faith extensions

–           Practical solutions to delivery issues

–           Unwritten but widely observed conventions

The fairs worked because merchants knew:

–           When to show up

–           Who would be there

–           What phase the market was in

There was decentralised authority; no single power controlled all trade. Defaulting meant reputational exclusion more than legal punishment, and the former could be more deadly than the latter. Deals evolved dynamically rather than being fixed, standardised transactions.

Sound familiar?

During the glory days of the Baltic Exchange, a different type of trust infrastructure developed, where information was collected, dispersed and acted on in a room full of people. Brokers relied on an identity, a voice, presence, and credibility whilst disputes were moderated through community norms, with the ultimate penalty of exclusion hovering over all participants. Market sentiment formed collectively, liquidity came from proximity, not technology. The “market” was the people – not a platform.

And there are parallels between the Baltic’s decline in structural importance and why the Champagne fairs’ influence faded: not because trade itself ended, but because the infrastructure that made them work well to start with was no longer the most efficient way to do business.

What happened in Champagne? Firstly, maritime routes bypassed the inland hubs completely, with Italian merchants sailing from places like Genova and Venice directly into northern ports such as Bruges or London. Secondly, permanent financial centres replaced temporary ones. At the fairs, finance happened periodically during settlement days, but after a while Italian banking houses developed permanent networks, and credit became continuous, not seasonal. Thirdly, political risk increased: the fairs had relied heavily on the protection of the Counts of Champagne, but once French royal policy shifted wars erupted and disrupted travel, taxation changed and confidence weakened.

Finally, the success of lex mercatoria itself sowed the seeds of Champagne’s demise: as it matured and its practice became more widespread, merchants could transact remotely as trusted networks no longer required meeting physically. The fairs were replaced not by failure, but by distributed systems.

The development of the Baltic Exchange was aided by the need for a trusted hub to reduce uncertainty: the prestige attracted participants willing to buy into its prestige and its norms. The quality of its information, security and liquidity made it central to the market, and the etiquette of dealing was more pervasive than its efficiency. But technological improvements – and the beginning of the demise of London as a maritime centre – meant direct connections reduced dependence on the hub itself.

The Baltic’s grip on the dry bulk chartering market began to be loosened as communication technology broke geography: from expensive telex to free email (and WhatsApp, ICE and everything else following in its wake). Chartering no longer had to take place in the room: information density was dispersed elsewhere.

The Baltic’s role was also diminished by the loss of its role in policing the market: dispute norms, fixture etiquette, market intelligence – heavily tied to the physical community – were no longer the preserve of the Exchange as the London Maritime Arbitrators’ Association became more professional and efficient, P&I Clubs developed their services and widespread (and digital reporting) replaced informal price discovery.

But the echoes remain, both of the Champagne Fairs and the Baltic Exchange. Questions are still asked, like “Good performer?” or “Will they pay?” People still wait for the daily indices and other assessments. The way the Baltic gathers its opinions on the state of the market does not rely on the trades themselves – unlike Stock Exchanges, and derivatives markets – but the opinions of their panel brokers. When physical hubs fade, abstract benchmarks often replace them, and network markets replace meeting markets.

Liquidity now flows through relationships distributed globally; brokers operate as facilitators rather than central actors. The Baltic’s daily rhythm used to set the rhythm of the market, but modern chartering is global, 24/7, and non-stop. But network markets still require shared etiquette, pricing anchors and trusted intermediaries, especially when reputation – either by knowledge, advice or skill of execution – matters more than membership of an institution.

The Baltic Exchange today is closer to being a memory of a governance layer of the market rather than being a physical engine of deal making, even though the indices remain incredibly useful. In a similar way, Champagne’s merchant law survived long after the fairs themselves faded.

Taking all this into account, what can history teach us, and what are the implications for the future of the tramp chartering markets? I don’t think dry bulk chartering will collapse into a chaotic and random free-for-all trading environment, but the more efficient communication becomes, the more deals will rely on judgement: information still needs interpretation, risk still needs to be felt and apportioned depending on prevailing market conditions. That’s why I don’t think brokers – despite technology, despite AI even – will disappear, even as the physical place where they operate becomes less important.

The Champagne fairs didn’t kill opportunistic international trade, they simply lost their position as the place where it happened. Shipbrokers won’t vanish with digitalisation, AI or even more fundamental structural change. But this does mean that companies and how they do things will become more important, more so than the cities in which they are based.

Historically, the Champagne Fairs concentrated people, and liquidity emerged from their proximity with each other. The Baltic Exchange in its glory years concentrated voice and presence leading to liquidity – and relevance – emerging from shared knowledge. So where does liquidity live now — in people, or in data?

Today, information moves faster than people. What used to be held in the broker’s head – positions, sentiment, risk appetite – is increasingly visible through other means available to anyone: AIS and vessel tracking data, fixtures databases, universal reporting and analysis, some of which is increasingly being pushed out via platforms.

Even though data distributes information, brokers still have to interpret meaning, and markets need meaning to function. As positional awareness is now almost universally available, there are consequently fewer opportunities for pure information arbitrage: negotiations shift toward risk appetite and the ability to execute. And what we have all noticed – and cannot blame entirely on President Trump – that with more data, and more signals, comes greater volatility in sentiment.

But “data-centred liquidity” doesn’t mean deals are done by algorithms. It means the market’s centre of gravity shifts from “Who knows something others don’t?” to “Who can interpret and execute better than others?”

The historical warning from Champagne is that when counterparties could connect more directly the information monopoly dissolved, and reduced the importance of the trading hubs. This did not eliminate the need for intermediaries, but their role evolved: merchants simply dealt through different networks instead of the fairs. When Champagne declined, trade did not cease to exist but neither did it become impersonal. In fact, Italian merchant houses became more powerful, not less, because complexity increased. In modern chartering, more transparency doesn’t eliminate ambiguity, it creates interpretive overload. Who interprets that? People, not platforms.

Brokers didn’t cease to exist after the Baltic stopped trading on the floor, they just became more widely distributed, more specialised, more expert, more interactive, more relationship focused.   In my opinion, market players increasingly want to work with – and reward – those that exercise judgement, credibility, timing, and value the relationship as something more than a commission-making post box. More data means an increasing need for expert human mediation.

Tramp shipping has always thrived on ambiguity, innovative negotiation and personal judgement, and that has so far survived technological shifts. When information becomes abundant, authority – and success – shifts from those who publish the charts to those who can navigate in the real world.

Simon Ward