Emperor Heinrich IV reacted angrily, accusing the dwarfs of thievery. Ill chosen words soon reached Karak Brynaz and the King of the dwarfs retaliated by refusing to pay a penny of the investment back, claiming the money as repayment for this "gross insult". Heinrich then sent an army, overland, to the northern border of the Dwarf Kingdom, intent on reclaiming the debt by force.
The war of the canal lasted but one battle however. The proud Empire army marched towards a hastily assembled dwarf throng just after dawn, and in the confusion General Ludwig was unable to correctly deploy his forces. Instead his elite infantry and cavalry ended up marching straight towards the enemy artillery. Fearsome dwarven engineering soon took its toll, and although the HSE army did not flee, the pride of Sigmarheim was cut to shreds by rocks and cannonballs.
After only two hours of battle the Empire general capitulated, surrendering his army to the dwarfs. The dwarfs accepted this surrender and banished the army from dwarven lands, and when the battered remnants returned Emperor Heinrich shut himself away, deeply embarrassed and ashamed. "I am the laughing stock of the world", he has been quoted as saying. Six weeks later he was dead, and his son Louis took the throne.
Louis, a much more pragmatic man than his father, immediately sought to restore relations with the dwarfs. Through his envoys, grovelling apologies and a great deal of flattery, he was able to secure the return of the initial Imperial investment, convincing the dwarf king to accept the destruction of the Sigmarite army as satisfaction of the dwarfs honour, rather than Imperial cash. Honour and relations restored, the canal was finally opened with great fanfare in 380PC.