I think what Bhranthan means is this scenario which happen in EC island wars. The situation where Nivemus did not declare war but allied with Caligus to fight Fallangard, with whom Nivemus has Neutral/Peace status? If yes, I think this is worthy of a discussion. Some of Nivemus realmmate even the Ruler asking my character Brock whether we should get alliance with Caligus or not; that was before the alliance with Caligus is made. No, keep that thought of Brock is influential out of your mind
I do not recall having complaint either when Perdan allied with OI, having Neutral status with Nivemus, Perdan army used their Murderous unit settings to completely destroy Nivemus whole army on OI land. That was during OI-Nivemus war and Perdan did not declare war either. I even praised Perdan military for their creativity to go around. I even harbored thought of setting our units to Murderous setting, thanks to Perdan giving me this idea earlier
Okay, back to the topic on the formula used to calculate who allied with who and who fight who.
The system formula taken into account the Alliance status first before the Neutral/Peace status next. so whichever realms allied will be protecting the allied realm. It makes perfect sense having your realm protecting your ally before it comes to protect a realm with Peaceful diplomacy with your realm. That is much I understand about the Diplomacy system.
Allied > Peace > Neutral > War