Legal Definitions - compromissory arbitration

Compromissory arbitration is a method of resolving disputes between two parties with the help of a neutral third party. The third party is agreed upon by both parties and their decision is binding. This means that both parties must abide by the decision made by the arbitrator.

One example of compromissory arbitration is when two companies from different countries agree to resolve a dispute through arbitration. They both sign a mutual promise to define the scope of the dispute and abide by the arbitrator's decision. This is known as an international arbitration.

Another example is when two individuals agree to resolve a dispute through arbitration instead of going to court. They both choose an arbitrator and agree to abide by their decision.

Compromissory arbitration is different from voluntary arbitration, which is when both parties agree to resolve a dispute through arbitration without any prior agreement.