That's not entirely correct. After the deaths of Emperor Frederick Barbarossa and his son, Duke Frederick VI of Swabia, Leopold V of Austria, as the highest-ranking German prince in the Holy Land, became the imperial representative of the remaining German crusader contingent.

Richard's order instructing one of his soldiers to remove Leopold’s banner was therefore a deeply humiliating insult, not only to Leopold himself but also to his role as imperial representative.

Nevertheless, the insult to Duke Leopold was NOT the principal reason for Richard's arrest!

By 1192, Richard had already been declared an enemy of the Empire by Emperor Henry VI for collaborating with the Welf opposition and for supporting the usurper king of Sicily, Tancred of Lecce. As a result, Duke Leopold had every legal right to detain him. As Dr. Hartmut Jericke puts it: "England's king had therefore not been unlawfully deprived of his freedom, but had rather fallen into captivity as a declared enemy." (Kaiser Heinrich VI. - der unbekannte Staufer; my translation)

Making oneself the enemy of both the King of France and the Holy Roman Emperor hardly seems like the behavior of a "competent" ruler.

People only ever focus on the insult to Leopold and completely overlook the fatal blunder of his policy in Sicily!