As you enter this place, which is Palamecia's Coliseum, head north to find Emperor, as a gate goes up once you get near him and he announces that the tournament will begin, as you enter a Boss Battle. If you want a strategy, head to Section VII. Boss Guide now, otherwise, fight this yourself and continue on afterwards. After the Battle, Emperor tells you you've won the reward, as Firion charges at him, but he's not that stupid and mentions this, as he disappears. Just then, Dark Knight and 3 Captains pop out and he orders them to be taken to the cells down below. Once you're back in control, examine the gate to the south, as Pavel comes and knocks the Captain out and then he releases you, as his thanks for rescuing him earlier.
After this, head east to find a Treasure Chest with an Antidote, which is guarded by Deadringers, Deadheads and Splinters, so be careful. Next up, head back west and go north now and head east when you can and enter the door at the far corner here to find 3 Treasure Chests, which hold a Cottage, Ether and an Elixir. Then, exit this room and go to the northeast part of this room and enter the door here and in this room, head up the stairs to the next floor. On this floor, follow the path around to find Princess Hilda and once you reach her, open her gate, as Gordon checks to see if she's ok. Then, Firion tells him they'll distract the Enemies, so to take Princess Hilda and leave, so, after they do, head west now and go up the stairs here.
Once you're on this floor, just follow the path around and exit this place and when you're outside, head back to your Ship and then go back to Altair. Back at Altair, talk to the Retainer at the entrance to the town to learn about how everyone's near Gatera, ready to launch an attack on the Enemy at Fynn. So, first, sell anything you need to, stock up on whatever, Heal at the Inn, train if you wish and when you're ready, head to Gatera, then go left a bit to find the Camp.