In December, 1795, he embarked with his regiment for the Canary Islands. While there he unfortunately had a love intrigue with a young Spanish lady, of great personal attractions; and in gaining her favour, won, also, the enmity of the governor and captain-general of the colony, who, by ill-luck, proved to be his rival. Enraged by the success of the handsome Lacy, the proud and revengeful Spaniard was so weak and unjust as to exile him from his regiment and the society of his companions in arms, by banishing him to Ferro, one of the smallest and most westerly of the Canary Islands. An arid and barren place, it is a mere mountain pass, composed of dark grey land, dotted here and there by sombre bushes. Indignant at such arbitrary treatment, Louis Lacy wrote bitter and fiery letters to the captain-general, who made him a prisoner, and brought him before a _Consijo de Guerra_, or court-martial, by sentence of which he was condemned to imprisonment as one labouring under mental alienation, and, after all his gallant services, was deprived of his commission. After a time he was permitted to return to Spain, and was sent to Cadiz _en retrait_. At that time Spain, having made peace with France, was at war with John VI. of Portugal. This contest was productive of no important event, and was terminated in 1801. Lacy arrived in Europe just as the last campaign was opened against the Portuguese; and hearing of it, he vainly solicited from the government of Charles IV. the honour of being permitted to serve in the Spanish army as a simple grenadier; but the mal-influence of his enemy, the Governor of the Canaries, still followed him, and this humble request was refused him. Poor Lacy, in bitterness of spirit and almost without a coin in his purse, resolved to push his fortunes elsewhere. He wandered on foot through the Peninsula, crossed the Pyrenees, and, like an humble wayfaring pedestrian, passed through France, and arrived at the town of Boulogne-sur-mer in October, 1803, when Bonaparte was assembling his great army for the invasion of Britain.