France (defendant) planned to construct a reservoir for the purpose of producing electricity at Lake Lanoux. A river running downstream from the lake led into Spain (plaintiff). In order to alleviate any water loss that Spain might suffer as a result of the reservoir’s construction, France offered to build an underground tunnel and supply the tunnel with water from other sources, a volume totaling the same amount that would be used in the reservoir plan. Spain challenged the plan, arguing that the plan violated the Treaty of Bayonne of 1866 (Treaty) between the countries in that France could not begin this kind of construction in the absence of a previous agreement between both countries. An arbitral tribunal was set up by France and Spain to address the issue.