So, it seems to me, that there is just no chance of any Frenchman serving in
any capacity, let alone as a commissioned officer, in the Royal Navy. There is
only one known exception to this: Sir Sidney Smith.

The "this" in this case is having Frenchmen serve under his command. So, the sentence could also read: . . . There is only one known exception to having loyalist Frenchmen serving under their command: Sir Sidney Smith.

Considering the subject under discussion, it should be completely clear to most anyone, but, of course . . .