Legal Definitions - ultra vires compromissi

Ultra vires compromissi is a legal principle that describes a situation where an arbitrator or an arbitration panel makes a decision or award that goes beyond the specific issues or powers that the parties agreed to submit for arbitration. Essentially, it means the arbitrator has acted "beyond the authority of the agreement to arbitrate." The parties involved in a dispute define the scope of the arbitrator's power through their arbitration agreement; if the arbitrator's decision addresses matters outside these agreed-upon boundaries, it can be challenged as ultra vires compromissi.

Here are some examples to illustrate this concept:

• Contract Dispute over Software Development:

  Imagine two companies, "InnovateTech" and "Digital Solutions," have a contract dispute over delays in a custom software development project. Their arbitration agreement specifies that the arbitrator will only decide on issues related to the project timeline and any associated financial penalties for delays. However, in the final award, the arbitrator not only rules on the delays but also includes a decision about the ownership of certain intellectual property rights related to the software's underlying code, an issue that was never mentioned or submitted by either party in the arbitration agreement.

  The arbitrator's decision regarding intellectual property rights would be considered ultra vires compromissi because it falls outside the agreed-upon scope of "project timeline and associated financial penalties." The arbitrator exceeded the specific authority granted by the parties' submission to arbitration.

• Employment Termination Dispute:

  Consider an employee, Ms. Chen, and her former employer, "Global Dynamics Inc.," who agree to arbitrate a dispute over Ms. Chen's termination. Their arbitration agreement explicitly states that the arbitrator's authority is limited to determining whether Ms. Chen was terminated "for cause" according to her employment contract and, if not, to calculate the appropriate amount of severance pay. The agreement does not grant the arbitrator the power to order reinstatement.

  In the arbitration award, the arbitrator finds that Ms. Chen was not terminated for cause, awards her the maximum severance pay, and additionally orders Global Dynamics Inc. to reinstate Ms. Chen to her previous position, a remedy that was neither requested by Ms. Chen nor included within the defined scope of the arbitration agreement.

  The order for reinstatement is ultra vires compromissi because the parties only submitted the issues of "for cause" termination and "severance pay" for arbitration. The arbitrator acted beyond the specific relief and issues the parties empowered them to decide.

• Real Estate Development Partnership:

  Two partners, Mr. Davis and Ms. Rodriguez, involved in a real estate development venture, agree to arbitrate a dispute over the distribution of profits from a recently completed project. Their arbitration agreement clearly states that the arbitrator's role is solely to review the project's financial records and determine the correct profit allocation between the two partners based on their partnership agreement.

  During the arbitration, the arbitrator, in addition to ruling on the profit distribution, also issues a directive ordering Mr. Davis to sell his shares in a completely separate, unrelated company to Ms. Rodriguez at a predetermined price, citing a general desire to resolve all potential future conflicts between the partners.

  The arbitrator's directive regarding the sale of shares in an unrelated company is ultra vires compromissi. The parties only submitted the "distribution of profits from a recently completed project" for arbitration. The arbitrator exceeded their authority by making a decision on a matter entirely outside the scope of the specific dispute submitted by the partners.