Unlike rogue private investors, states and state-owned entities cannot manipulate arbitral process to secure favourable awards, JSA Partner Sidharth Sethi recently said.

Sethi argued that discussions about disputes involving state-owned entities often assumed that the private investor was the wronged party. However, states could also suffer from failed projects, defaults by contractors, and investors who did not honour their obligations, he said.

“Many rogue private investors are able to manage the process. Can a state or state-owned entity do that? Never,” Sethi said.

He described fraud and corruption as the “elephant in the room” when discussing problems with arbitration.

Sethi further suggested that some adverse arbitral awards faced by India during the mid-2010s were a result of such conduct. He did not, however, identify any particular investor, arbitration or award.

His comments came during a panel discussion titled Disputes Involving State-Owned Entities: Emerging Issues in International Arbitration. The session was organised by Young IAMC Hyderabad in collaboration with Drew & Napier during Singapore Convention Week 2026.

IAMC CEO and Registrar A J Jawad delivered the opening address.

The discussion was moderated by Osborne Partners’ Partner and Practice Head for Asia and the Middle East Montek Mayal.

The panel comprised JSA Partner Sidharth Sethi, Fox Mandal & Associates Senior Partner Purnima Kambalay, Khaitan & Co Partner Raj Panchmatia, DXC Technology’s Head of Disputes and Litigation for Asia Jayne Kuriakose, Drew & Napier Equity Director Daniel Cai and Fourth Partner Energy Chief Legal Officer Shujath Bin Ali.

Sethi said investor-State arbitration and ordinary contractual arbitration treated states differently. Investor-State arbitration was asymmetric by design, while ordinary arbitration allowed state entities to bring claims and counterclaims against private contractors.

However, a state-owned entity could obtain an award against a thinly capitalised special purpose vehicle whose only meaningful asset was the project itself, he pointed out. If the contractor became insolvent, the award obtained by the state entity could be reduced to an unsecured claim under the waterfall mechanism of the Insolvency and Bankruptcy Code.

Sethi added that government entities sometimes wanted to settle disputes but were deterred by the possibility of audit or vigilance scrutiny. Consequently, challenges and appeals against awards were filed almost instinctively.

“Challenges and appeals are filed almost as an instinct, a reflexive action, which then creates problems for the State,” he said.

He added that while private investors were primarily concerned about securing a neutral forum, the bigger problem for states was recovering money after obtaining an award.

Fox Mandal & Associates Senior Partner Purnima Kambalay earlier criticised the dispute resolution clauses used in contracts with Indian government bodies. She said these were often standard “cut-and-paste” clauses dictated by state-owned entities because private parties possessed little bargaining power.

Kambalay said some clauses confusingly contemplated court proceedings even while providing for arbitration. Others allowed the chairperson of the state-owned entity to appoint the sole arbitrator.

“Now, that whole neutrality, independence, no bias, all these principles just go out of the window,” she said.

Khaitan & Co Partner Raj Panchmatia cautioned companies against commencing proceedings against government bodies prematurely. He said officials often became unwilling to explore settlement after arbitration or litigation was initiated.

Panchmatia also said Indian courts did not take an adverse view of enforcing awards against state-owned entities. A state entity that had entered into a commercial contract and agreed to arbitration could not subsequently invoke sovereign immunity to protect its assets, he added.

DXC Technology’s Head of Disputes and Litigation for Asia, Jayne Kuriakose, praised the Indian practice of requiring parties challenging arbitral awards to deposit money. She said the requirement was applied to both private and state-owned entities and should be considered by other jurisdictions.

Drew & Napier Equity Director Daniel Cai said treaty protection could provide investors with a second layer of protection when the contractual counterparty was a state-owned entity but the harmful action came from a ministry or regulator. However, treaty arbitration was expensive and could not substitute for properly drafted contracts, he cautioned.

Fourth Partner Energy Chief Legal Officer Shujath Bin Ali said a single project could involve several government bodies responsible for approvals, financing and regulation. A policy change by one agency could consequently expose the private company to performance risks under its agreement with another.

On the assessment of damages, Mayal said the choice of valuation date could materially affect the final calculation, particularly in a volatile market. He illustrated this by contrasting a valuation undertaken on February 21 with one conducted on March 1, saying that intervening events could completely change the calculation of loss.

Mayal also cautioned against applying a country risk premium in a manner that penalised an investor for the State’s own conduct. He said a State action such as expropriation could itself increase the perceived risk attached to the investment. Factoring that increased risk into the valuation could therefore reduce the compensation payable for the very action that caused the loss.

IAMC CEO and Registrar AJ Jawad delivered the opening address. He said state-owned entities played a significant role in cross-border investment and commercial activity, particularly across Asia and the Middle East. Their increasing participation had also made disputes involving such entities more consequential, he added.

Jawad said these disputes raised fundamental questions about the counterparty's identity and the enforceability of any eventual award. He said the panel would examine how such issues were evolving in practice, including the procedural challenges and emerging trends when a state-affiliated entity was a party to a dispute.