Dutch Ceylon was a governorate established in present-day Sri Lanka by the Dutch East India Company. It existed from 1640 until 1796.
In the early 17th century, Sri Lanka was partly ruled by the Portuguese and the Sinhala Kingdom, who were constantly battling each other. Although the Portuguese were not winning the war, their rule was rather burdensome to the people of those areas controlled by them. While the Dutch were engaged in a long war of independence from Spanish rule, the Sinhalese king (the king of Kandy) invited the Dutch to help defeat the Portuguese. The Dutch interest in Ceylon was to have a united battle front against the Iberians at that time.
Portuguese rule was always in the maritime provinces and the people whom they converted were the coastal folk. They were the backbone of their power. Many of the Princes they converted had either died or were no longer Catholic. The rest of the Ceylon remained in the Buddhist-Hindu religion.
The Dutch were used by the Sinhala king to take revenge on the Portuguese who wanted to expand their rule. The coming of the Dutch ensured that the Portuguese had two enemies to deal with, so that finally the Portuguese were forced to sign a treaty with the Dutch and come to terms with their open economies. Finally, the Portuguese left Ceylon.
The war with Portugal was against their ruler the King of Spain. Once Portugal obtained its freedom from Spain the Netherlands settled for peace with Portugal. Then they divided the occupied areas of Ceylon amicably under a treaty signed in Goa. Slowly, the Dutch became the rulers of coastal and outer areas of Ceylon and Indonesia, and the Portuguese were left with smaller pieces of territory than those of the Dutch and the English.
From the time that Christopher Columbus discovered America there was a significant Iberian challenge facing large parts of the world for Spain and Portugal in conquering the Americas and many other territories around the world. In the east, Portugal held territories not only in Ceylon but in India and what is now Indonesia, then referred to as the East Indies.
From 1580 to 1640, the throne of Portugal was held by the Habsburg kings of Spain resulting in the biggest colonial empire until then (see Iberian Union). In 1583 Philip I of Portugal, II of Spain, sent his combined Iberian fleet to clear the French traders from the Azores, decisively hanging his prisoners-of-war from the yardarms and contributing to the "Black Legend". The Azores were the last part of Portugal to resist Philip's reign over Portugal.
The Netherlands meanwhile were in open revolt against their Habsburg overlord and declared themselves a Republic in 1581. Prior to 1580 Dutch merchants had procured colonial produce mostly from Lisbon, but the Iberian Union cut off this supply. Survival of the fledgling republic depended on their going into the colonial business themselves.
With two global empires to rule, and with growing colonial competition with the Dutch, English and French, the Habsburg kings neglected the protection of some of the Portuguese possessions around the world. In this period Portugal lost a great number of lands to the new colonial rivals.
A map of the lands of the Habsburg kings in the period of personal union of Portugal (blue) and Spain (red/pink) (1580–1640)
During the Twelve Years' Truce (1609–21) the Dutch made their navy a priority in order to devastate Spanish maritime trade — upon which much of Spain's economy depended — after the resumption of war. In 1627, the Castilian economy collapsed. Even with a number of victories, Spanish resources were now fully stretched across Europe and also at sea protecting their vital shipping against the greatly improved Dutch fleet. Spain's enemies, such as the Netherlands and England, coveted its overseas wealth, and in many cases found it easier to attack poorly-defended Portuguese outposts than Spanish ones. The Spanish were simply no longer able to cope with naval threats. In the Dutch–Portuguese War that followed many erstwhile Portuguese possession fell into Dutch hands.
Between 1638 and 1640 the Netherlands even came to control part of Brazil's northeast region, with their capital in Recife. The Portuguese won a significant victory in the Second Battle of Guararapes in 1649. By 1654, the Netherlands had surrendered and returned control of all Brazilian land to the Portuguese.
Although Dutch colonies in Brazil were wiped out, during the course of the 17th century the Dutch were able to occupy Ceylon, the Cape of Good Hope, and the East Indies, and to take over the trade with Japan at Nagasaki. Portugal's Asiatic territories were reduced to bases at Macau, East Timor and Portuguese India.
Forts in Batticaloa, Trincomalee, Negombo and Galle were liberated with the help of Ceylonese Army and Dutch Navy. In reality these forts were in marginal areas where Kotte Kingdom did not exist at that time. It was Tamils who lived around these forts except in the case of Galle fort. as such the Portuguese were unable to defend it with the mercenaries whom they had recruited from Cormandel and the western Indian coasts.
As such these forts became the property of the Dutch East India Company. King Rajasinghe wanted to demolish all of them. But Dutch were not paid off their dues against the war against Portuguese and as a result the Dutch did not want to demolish them. The Dutch Sinhalese treaty had conditions whereby the Sinhala king had to maintain and support the Dutch forces as they waged war on behalf of the Ceylon/Kandy King against the Portuguese.
The treaty had two copies; the Dutch copy had a clause that the Dutch would own and operate the seaports. The Kandyan copy did not have this clause. The King did not abide by the treaty as his copy was interpreted as saying that the ports would go back to the King of Kandy. King was fulfilling his part of the obligations. The Dutch took all the ports and forts and the rest of the lands, replacing the Portuguese. As such the Dutch never left Ceylon and replaced Portugal and started ruling the parts where they seized power as the agents of the king. The people were Tamils and they accepted their new ruler without many reservations. Only in Galle and Negombo did the chance of a Portuguese attack remain a real threat.
Rajasinghe always wanted to get rid of both the Portuguese and the Dutch by setting one against another. At times when the Dutch officers or commanders offended him, he ordered their assassination. At times he massacred a shipload of Dutchmen for the minor misbehavior of their captain. This kind of cruel and crafty behavior made the Dutch determined to keep the forts and the vast amount of land they captured.
Rajasinghe and his courtiers did not offer the help they should have. As a result most of the battles were waged by the Dutch who suffered heavy losses. But when it came to sharing the loot from the captured forts like Galle, the Kandyan king and his forces were there for the occasion and the Dutch gave half the war assets to the Kandyan king.
The Dutch started ruling and expanding their areas. Now the King of Kandy searched for another powerful party to help in the war. For this, they approached France. Finally, England replaced Holland by diplomatically taking over Dutch colonies during the Napoleonic wars. The Dutch settled several Malay soldiers and policemen in Ceylon as a way of ruling the native population. The Dutch were republicans who brought the ideals of republicanism to Ceylon and thus enabled the larger communities to dominate.