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The Grand Duke is set in the Grand Duchy of Pfennig-Halbpfennig in 1750.
Act I
In the market square in the capital city, Speisesaal, Ernest Dummkopf's theatrical company is ready to open their production of Troilus and Cressida that night. They also prepare to celebrate the wedding of the troupe's leading comedian, Ludwig, to Lisa, a soubrette of the company. The marriage cannot take place, however, as there are no parsons available in the city: all clerics have been summoned to the palace by the Grand Duke of Pfennig-Halbpfennig to discuss his own forthcoming marriage. Everyone has grown to resent the Grand Duke, and all of the company had already become members of a plot to blow him up with dynamite and place a new man on the throne. The secret sign by which members of the conspiracy recognise each other is to eat a sausage roll – a food of which they are by now all heartily sick.
It is clear that Ernest will win the election which is to follow the coup and become Grand Duke, which troubles Julia Jellicoe, a famous English comedian. As leading lady of the company, she is bound by contract to play the leading female role in any production. If Ernest, the manager, becomes the Grand Duke, she reasons that she will have to be the Grand Duchess. She says that this is a repugnant prospect to her (though it is a delightful one to Ernest), but that she will play the part in a professional manner.
Note: Gilbert supplied a topsy-turvy twist by writing Julia's dialogue in a German accent, since she is the only English character in Ernest's company; all of the Germans speak with an English accent. The first Julia, Ilka Pálmay, was Hungarian but performed mostly in German. Modern productions do not always carry out this idea. For instance, in the 1976 D'Oyly Carte recording (which did not include the dialogue), the singer playing Julia did not affect a German accent.
Meanwhile, Ludwig has met a man who returned his secret salute by eating three sausage rolls. Ludwig believed him to be a member of the conspiracy and told him all the details; only then did he realise that he had revealed the entire plot to the Grand Duke's private detective. The company are aghast, believing they are doomed once the Grand Duke learns of the plot. The company's notary, Dr. Tannhäuser, appears and offers a solution. He explains that a century ago the Grand Duke of the time, concerned about the loss of life in duelling, had created the statutory duel: the duellers draw cards, and the one who draws the lower card loses. He becomes legally dead, and the winner takes over his position: his property, responsibilities and debts. The law regulating statutory duels, like all laws of Pfennig-Halbpfennig, lasts for one hundred years unless revived, and it is to lapse tomorrow.
Tannhäuser counsels Ernest and Ludwig to fight a statutory duel immediately: the loser will be legally dead, and the survivor can go to the Duke and confess the whole plot. As informer he will be spared, while the other party will be dead and so beyond retribution. The next day, the loser will come to life when the law lapses, but since death expunges crime, his character will be unstained. Ernest and Ludwig promptly "fight" a statutory duel: Ernest draws a king, but Ludwig draws an ace and is declared the winner.
They leave, and the miserly yet pompous and moralistic Grand Duke Rudolph appears, heralded by his corps of chamberlains. He instructs them in the arrangements for his wedding the next day to the rich, but also miserly, Baroness Caroline von Krakenfeldt. She arrives, handing him a letter from his detective, and they sing about how exactly in agreement are their ideas on economy. Caroline is disconcerted that Rudolph insists on courting her in the market square, but he explains that he has made a law compelling couples to do all courting in the square so as to increase the value of his properties around the square. She approves of this example of economy.
Caroline is also upset by a newspaper article which says that Rudolph was betrothed in infancy to the Princess of Monte Carlo, but he explains that the engagement is "practically off." The betrothal lapses when the Princess reaches the age of twenty-one, which will happen tomorrow, and her father, the Prince, dares not venture out of his house for fear of being arrested by his creditors.
Once he is alone, Rudolph reads the letter and learns about the plot to blow him up. Ludwig arrives, intent on denouncing the plot to him. Before he can do so, Rudolph declares that he would give anything to avoid being blown up the next day, and Ludwig sees a way out. He feigns patriotism and suggests that the two engage in a statutory duel. He explains that they will hide cards up their sleeves, guaranteeing victory to Ludwig. When the plot unfolds, Ludwig will bear the brunt of it. The next day, when the Act authorizing statutory duels expires, Rudolph can come back to life unharmed. Although Rudolph is sceptical, he accepts Ludwig's proposal.
Rudolph and Ludwig summon the city's inhabitants. They stage a mock quarrel and conduct the rigged statutory duel as planned: Rudolph's king is beaten by Ludwig's ace, making Ludwig the Grand Duke. Rudolph's subjects berate him with scorn, and he retreats, threatening revenge. Ludwig uses his new powers to extend the Act for another hundred years, thus ensuring that neither Rudolph nor Ernest can come back to life.
Julia Jellicoe appears and once again asserts that, as leading lady, she must take the leading role of the Grand Duchess. Lisa leaves in tears. Julia points out that if she and Ludwig are to rule over a Grand Ducal court, they need to be dressed more impressively than their everyday clothes will allow. Ludwig recalls that they have a complete set of brand-new costumes for Troilus and Cressida, which they can use to "upraise the dead old days of Athens in her glory."
Act II
In a room in the Ducal palace, the new Grand Duke, Grand Duchess and court parade in classical costumes and sing a Grecian chorus. Left alone, Ludwig and Julia fail to agree on how her role is to be played. Caroline von Krakenfeldt arrives for her wedding and is startled to find that Rudolph has been replaced by Ludwig. But once she discovers that Ludwig has beaten Rudolph in a statutory duel, she points out that he must take on Rudolph's responsibilities – including his betrothal to her. So despite being already married to Julia, Ludwig goes off with Caroline to get married, and Julia makes a dramatic exit.
Ernest, though legally dead, is desperate for news and arrives to try to find out what is going on. He sees the wedding procession in the distance and assumes that Ludwig is marrying Lisa; but it cannot be so, for Lisa appears. She sees him and runs away in fright, since he is a "ghost". He then supposes that Ludwig must be marrying his Julia, but she too appears. Though affecting to be also frightened, she stays and tells him what Ludwig has done.
They leave, and the wedding party returns. Caroline is enjoying the rare pleasure of drinking "when somebody else pays the bill." Yet another unexpected visitor arrives: it is a herald, who announces that the Prince and Princess of Monte Carlo are on their way. Ludwig decides to give the Prince a theatrical welcome, and tells the company to hide.
The Prince of Monte Carlo arrives with his daughter the Princess and a retinue of supernumeraries – out-of-work actors hired from the Theatre Monaco to play the part of nobles. He has reversed his fortunes by inventing a game called roulette, which has allowed him to pay his debts, hire the supernumeraries, and take his daughter to Pfennig-Halbpfennig just in time to marry the Grand Duke before the engagement expires.
Ludwig and the court spring out at them, dancing a lively can-can. The Princess is shocked and upset when she discovers that Ludwig already has three Grand Duchesses. She points out, however, that her claim predates the others', and Ludwig is therefore obliged to marry her.
Ludwig and the Princess are about to go off to yet another wedding party, when Ernest, Rudolph and Dr Tannhäuser burst in. The Notary reveals that the Act regulating statutory duels specifically states that the ace shall count as lowest, so Ludwig did not win, was never Grand Duke, and cannot have revived the act. Within seconds, the Act expires, returning Ludwig and Ernest to the living. Three couples marry: Rudolph and the Princess; Ernest and Julia; and Ludwig and Lisa.
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