for the water to flow out of the top section, an equal space of air has to flow in to take its place. if the front wall of the top section extends far enough below the surface of the bottom tank, and the top secion is sealed off at the top, no air will flow into it and therfore no water out.

the bubbler must be drawing air from inside the sealed top tank, not outside, otherwise it would slowly pump all of the water out.

the waterfall probably pumps out from the top section to create an overall current and circulate the water. waterfall to lower to upper.