On November 21 1806 Napoleon introduced a widespread embargo against British trade with European nations under his control. He reasoned that if he didn't have the resources to invade Great Britain or defeat the Royal Navy at sea, at least he could damage the growing might of British manufacturing and industrial power thereby inflicting serious inflation and debt.

Napoleon imposed tariffs which favoured France but many of the continental European states were suffering severe shortages of goods from the French colonies and desperately needed trade with Britain to meet the shortfall. British merchants seized their opportunity, seeking out new markets and engaging in widespread smuggling with continental Europe. Napoleon's customs men were based on land and spread too thinly to stop British smugglers, especially when Napoleon's chosen rulers in Spain, Westphalia and other German states turned a blind eye to the involvement of their fishermen and farmers. The merchants of Hamburg employed five or six hundred women each day to carry 14 lbs of coffee and other goods into the city under their skirts.

Heligoland had a key role in defeating this so-called Continental System.

The North Sea coast of Europe between the mouths of the Rivers Ems, Weser and Elbe is low-lying and difficult for large vessels to approach so it is ideal for smuggling contraband goods into Central Europe. On 5th September 1807 the British fleet returning from Copenhagen supported this trade by seizing the small island of Heligoland from the Danes and enabling it to be turned into a staging post for goods awaiting shipment into Germany or Holstein. A garrison of 600 men defended the island and men-of-war patrolled the surrounding seas. Over 200 merchants and agents had settled on the island by 1808, and by 1809 it was not unusual for several hundred vessels to berth each day.