Eli Zaretskii <eliz@gnu.org> writes:

>> From: Joakim Jalap <joakim.jalap@fastmail.com>
>> Date: Wed, 09 Mar 2016 13:02:49 +0100
>>
>> Perhaps this is not a bug, but it certainly surprised me.
>
> Of course, it's a bug.

Good :) Or something...

I looked into it a bit more, and it seems to me the trouble is that
`universal-argument--mode' uses `set-transient-map' to set
`universal-argument-map' when `C-u' is pressed. This sets
`overriding-terminal-local-map', which makes quail chicken out. Below
are two different patches which fix the original problem. I have no idea
if this is a good way to do it, but it seems to work for me :)

This way we just ignore `overriding-terminal-local-map' if it is
`universal-argument-map'.