Over the years, the notion of transactions has become synonymous with providing fault-tolerance, reliability and robustness to database systems. However, challenges arise when we try to apply them to novel computing paradigms such as ActiveXML (AXML) systems. AXML provides an elegant platform to integrate the power of XML, Web services and Peer to Peer (P2P) paradigms by allowing (active) Web services calls to be embedded within XML documents. We propose a transactional framework which provides relaxed ACID properties to AXML systems. Relaxed atomicity is usually provided with the help of compensation. However, current compensation based models assume the existence of a pre-defined compensating operation. Also, compensation is assumed to be more or less peer (or service provider) dependent, i.e., the original and compensating services are provided by the same peer. We show how compensation for AXML transactions can be constructed dynamically at run-time and achieved in a peer independ...