Midgard was there before the Allagans, at least, because Bahamut was one of his brood in eggs that traveled with him. That means the covenant with Hydaelyn was in place before the Allagan Empire. The empire didn't encounter Primals until it invaded Meracydia though, after it defeated the dragons living there. That means, the seal only affected the Eorzea continent. This makes sense though that there would be a seal, due to the high volume of aether that the continent has compared to the other continents, it makes it much easier to summon Primals as a result. I'm not sure why Midgard wasn't roused to respond though, maybe he was worried about the strength of the empire and thought discretion was the better option, given what had happened to his children in Meracydia.