The Austro-Hungarian Compromise of 1867 ("the Compromise") is born through Act 12, which establishes the Austro-Hungarian Empire.

The Austro-Hungarian Compromise of 1867 established the dual monarchy of Austria-Hungary, which was a military and diplomatic alliance of two sovereign states. The Compromise only partially re-established the former pre-1848 sovereignty and status of the Kingdom of Hungary, being separate from, and no longer subject to, the Austrian Empire. The compromise put an end to the 18-year-long military dictatorship and absolutist rule over Hungary which Emperor Franz Joseph had instituted after the Hungarian Revolution of 1848. The territorial integrity of the Kingdom of Hungary was restored. The agreement also restored the old historic constitution of the Kingdom of Hungary.

Austria-Hungary, also referred to as the Austro-Hungarian Empire, the Dual Monarchy or the Habsburg Monarchy, was a multi-national constitutional monarchy in Central Europe between 1867 and 1918. A military and diplomatic alliance, it consisted of two sovereign states with a single monarch who was titled both the Emperor of Austria and the King of Hungary. Austria-Hungary constituted the last phase in the constitutional evolution of the Habsburg monarchy: it was formed with the Austro-Hungarian Compromise of 1867 in the aftermath of the Austro-Prussian War, following wars of independence by Hungary in opposition to Habsburg rule. It was dissolved shortly after Hungary terminated the union with Austria in 1918 at the end of World War I.