We don't really hear too much about how the treaty was broken. Just a tacit admission from Blofiswyn that it was the Limsan's fault. From what Titan says, we can infer that it is or involves trespassing on their land. It is incidental knowledge in other quests that few Kobolds have left their mountain. Also that they seem to view their mountain as a kind of holy land, hence their worship of a Primal of earth. The existence of Camp Overlook probably figures into the violation of the treaty, as well as Poor Maid's Mill and Camp Bronze Lake depending on how far south they believe their land claim is.