This agreement related to their dispute over the territorial and maritime boundaries between them, and in particular the title to the Picton, Nueva and Lennox islands near the extreme end of the American continent, which was submitted to binding arbitration under the auspices of the United Kingdom government.
On 25 January 1978 Argentina repudiated the arbitration decision and on 22 December 1978 started (and a few hours later aborted) military action to invade both those islands and continental Chile.
The Arbitration Agreement of 1971 stipulated: In this way the United Kingdom did not have any influence on the judgement: the procedure, the legal framework, the judges and the matter in dispute had all been defined by both countries.
This principle, known in jurisprudence as Uti possidetis, served two purposes: the first was to divide the territory between the two countries, and the second to preclude the creation of Res nullius areas that could have been taken in possession by other powers (such as the United States of America, the UK or France – although the Beagle Channel had been unknown until 1830 and there had been no Spanish settlements south of Chiloé).
Argentina was awarded all islands, islets and rocks near the north coast of the channel: Bridges, Eclaireurs, Gable, Becasses, Martillo and Yunque.
At the eastern end of the channel, the judgement recognized the sovereignty of Chile over the Picton, Nueva and Lennox islands and all their adjacent islets and rocks.
According to Argentina:[9] It has been argued that the Argentine claims over the Beagle Channel could not be sustained from a legal point of view and that in practice many of their assertions were subjective.
[10] The court awarded navigable waters on the north bank of the eastern part of the Channel to Argentina, but otherwise it met all Chilean claims.