No bureaucrat in India has the courage to settle a government dispute through mediation for fear of later being blamed for favouring a private party, former Supreme Court Justice L Nageswara Rao said at a recent panel discussion in London..Justice Rao said that mediation may not immediately work as an alternative in disputes involving government entities unless officials are protected from future allegations. He said,“Mediation was not an alternative, because in India, there is no bureaucrat who would have the courage to settle a dispute, lest he be blamed of some favouritism.”The former also pointed to a contradiction in India’s arbitration policy. While India wants to promote itself as an arbitration hub, public sector undertakings have been moving away from arbitration, he said.“On one hand, we want to make India an arbitration hub. And on the other, if the public sector undertakings are not willing to go for arbitrations, that is not a good sign.”He referred to the Ministry of Finance’s 2024 office memorandum discouraging arbitration in high-value government disputes and said that public sector undertakings had started adopting the circular..Justice Rao was speaking at a session held as part of London International Disputes Week 2026. The discussion was moderated by Anuradha Agnihotri of Herbert Smith Freehills Kramer LLP.The panel also featured Rashna Mistry of Tata Projects; Niranjan Venkatesan KC of One Essex Court; Amar Gupta of JSA Advocates & Solicitors; and Neeti Sachdeva of the Mumbai Centre for International Arbitration.The session was hosted by Herbert Smith Freehills Kramer, JSA Advocates & Solicitors and the Mumbai Centre for International Arbitration..Responding to a question on negotiating dispute resolution clauses with government entities, Mistry said that government contracts generally come with fixed templates and contractors are expected to sign them as they are.“It's a big fat zero. No negotiation is possible.”She said that government and PSU officials are often unwilling to alter contract terms because of the risk of being investigated years later.“The government employees, or the public sector undertaking employees, do not take the initiative to negotiate. Because why should they take the burden on them? Couple of years, they'll be investigated, they lose their pension.”According to Mistry, the attitude is often that contractors must either accept the terms or walk away..Gupta agreed that mediation would remain difficult unless there is an institutional framework that empowers officers to accept outcomes that may not favour the government..Sachdeva, however, said that the position was not entirely bleak. She pointed to Maharashtra’s policy requiring institutional arbitration clauses in government contracts above ₹5 crore and pointed out that some departments had shown interest in institutional arbitration..Venkatesan KC highlighted that disputes involving State entities differ from disputes against private parties in several ways. He said that claims against State entities are generally harder to settle as they usually take longer to issue instructions.“That is not just with the Indian state. It is generally the case with any state.”According to him, this delay can make case management difficult not only for the State entity, but also for the tribunal and the opposing party. He added that arbitral tribunals may sometimes be more sympathetic to procedural indulgences sought by States or State-related entities.Venkatesan went on to say that foreign investors often seek arbitration clauses or English court jurisdiction because they want a neutral forum if things go wrong. However, he cautioned that a neutral forum by itself may not be enough where the counterparty is a State.“If you fall out with a state or a state-related entity, merely having a neutral dispute resolution clause is not enough to vindicate your rights.”He said that a State could seize property domestically or enact legislation affecting an investor’s rights. Therefore, investors should try to secure not only a neutral dispute resolution process, but also neutral governing law where possible.
