Before the most recent incidents, the Federation's closest brush with hostilities with the Dalriada probably came because of the Tabilin system. There they are exploiting the dilithium resources for profit, and trading minor goods with the Cabbali, the aboriginal natives of the system. Federation merchants, unhindered by the Federation and Star Fleet policy of non-interference since they are outside of Federation space, also began to exploit the dilithium resources.

With the reluctant approval of the Dalriada, the Federation set up an outpost on the planet to insure trade with the surface is kept at a low level of technology and that no substances harmful to the Cabbali are brought to the planet.  While the Dalriada considered these actions more than a bit silly and wasteful, they were unwilling to create an interstellar incident and accepted the Federation proposal.

However, some of the Dalriada still took their trade a bit further.  They provided primitive firearms, similar to those used and made by the Cabbali, but in much higher volume than the aborigines could produce.  Moreover, they supplied a replicated version of a narcotic to the Cabbali.  This narcotic has the rather nasty side effect of driving users insane, if used for an extended period of time.  Also, as with most narcotics, it deadens pain sensation. The weapons and drugs were exceptionally inexpensive for the Dalriada, and were traded for slave labor in the Dilithium mines.  With the large amount of profit to be had in the Tabilin system, they were able to convince Federation authorities to be less than vigilant in their duties.  It backfired when they overproduced narcotics and underestimated the problems of large-scale addiction and the resulting insanity.

This created a major incident between the Federation and the Dalriada which resulted in an armed conflict between the Federation cruiser Hood and the Dalriadan armed merchantman DSF Special Delivery, which was later revealed to be a Royal Dalriadan Navy Q-ship. The Hood was in the Tabilin system to support the inspection network, but realized that there was wide-spread laxness and corruption in the system.

The inspection system remains in effect, but it has been overhauled and it is now monitored much more closely by Federation authorities outside of the system.