Much controversy has surrounded the recent arbitration between Croatia and Slovenia. Nonetheless, the proceedings represent a welcome step in the right direction in terms of the perception and use of arbitration as a quasi-diplomatic interstate dispute resolution mechanism. Such an approach to arbitration is evident both in the parties’ arbitration agreement and in the arbitral tribunal’s final award in this case. The article first explains the proper use of interstate arbitration in its original form as a quasi-diplomatic process. This process produces a final and binding decision that respects international law yet does not necessarily rely solely on it. The article then examines how this original quasi-diplomatic nature of interstate arbitration is reflected in certain aspects of the Croatia v. Slovenia case.