The action of Billy Budd takes place aboard the H.M.S. Bellipotent, a ship of the British navy, during the year 1797, beginning in July of that year. Short of men, the ship sets sail from the home port to join the Mediterranean fleet. Billy, serving on a merchant ship named for one of Thomas Paine's political tracts supporting liberty, is impressed into service aboard the warship. At the outset, his loss of liberty sounds an ironic note which dominates the entire novel.
Although the setting is a ship, the sea is largely overlooked because the novel looks inward. The microcosm of the ship stands out against the background of war and mutiny at a time when revolution against tyranny and oppression threatened to force the Western world into anarchy as the masses rushed toward liberty. The action occurs during Britain's war with France, shortly after the "Great Mutiny" in the British navy at Spithead and the Nore. This fact complicates Billy's crime and condemns him to serve as an example of wartime discipline.
The fleet is en route to the Mediterranean, a word which denotes a place "in the middle of lands." Another aspect of locale is the eventual arrival of the ship at Gibraltar, a craggy jut of land ruled by Britain and separating the more civilized European cosmos from the dark continent of Africa. Thus the setting suggests the moral implications of Billy's own navigation between goodness and the inexplicable evil that superintends Claggart's spirit.