JSA Advocates & Solicitors’ Partner, Sidharth Sethi, articulated a significant disparity in how states and rogue private investors navigate the arbitration process. During a recent discussion, Sethi emphasized that while private investors might manipulate arbitration to their advantage, states and state-owned entities often lack such leverage.
Sethi addressed the prevailing assumption in disputes involving state-owned entities, highlighting that private investors are frequently perceived as the aggrieved parties. However, he pointed out that states also suffer from project failures, contractor defaults, and investors not fulfilling their commitments. “Many rogue private investors can manage the arbitral process. Can a state or state-owned entity do that? Never,” he asserted.
Fraud and corruption were identified as major issues within arbitration, with Sethi suggesting that some negative arbitral awards against India in the mid-2010s might have stemmed from such issues. However, he refrained from naming specific investors or cases.
Panel Discussion on Arbitration Challenges
The insights were shared at a panel discussion titled “Disputes Involving State-Owned Entities: Emerging Issues in International Arbitration,” organized by Young IAMC Hyderabad in partnership with Drew & Napier during the Singapore Convention Week 2026. The event was inaugurated by A J Jawad, CEO and Registrar of IAMC.
Moderated by Montek Mayal from Osborne Partners, the panel featured notable experts including Sidharth Sethi, Purnima Kambalay from Fox Mandal & Associates, Raj Panchmatia from Khaitan & Co, Jayne Kuriakose from DXC Technology, Daniel Cai from Drew & Napier, and Shujath Bin Ali from Fourth Partner Energy.
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Challenges in Investor-State Arbitration
Sethi elaborated on the asymmetric nature of investor-State arbitration, which contrasts with ordinary contractual arbitration where states can file claims against private contractors. He highlighted the vulnerability of state entities when an award is reduced to an unsecured claim if the counterparty becomes insolvent, a situation exacerbated by the waterfall mechanism of the Insolvency and Bankruptcy Code.
Further complicating matters, state entities often hesitate to settle disputes due to potential scrutiny from audits or vigilance bodies, leading to instinctive challenges and appeals against arbitral awards.
The discussion also touched on the limitations of dispute resolution clauses in contracts with Indian government bodies. Purnima Kambalay criticized these clauses for often being standard and dictated by state-owned entities, resulting in a lack of neutrality and independence.
Legal Insights and Recommendations
Raj Panchmatia advised against prematurely initiating proceedings against government bodies, noting that it could hinder settlement efforts. He also emphasized that Indian courts do not favor state-owned entities in enforcing awards.
Jayne Kuriakose praised India’s requirement for parties challenging arbitral awards to deposit money, a practice she suggested could benefit other jurisdictions.
Daniel Cai pointed out that treaty protections offer a second layer of security for investors dealing with state-owned entities, although he cautioned against relying solely on this mechanism due to its high costs.
Shujath Bin Ali discussed the complexities of multi-agency involvement in single projects, which can lead to performance risks for private companies due to policy changes by government bodies.
Montek Mayal highlighted the importance of choosing the appropriate valuation date for damages assessment, noting that market volatility can significantly impact calculations. He also warned against applying a country risk premium in a way that penalizes investors for the State’s actions.
In his opening remarks, A J Jawad emphasized the significant role of state-owned entities in cross-border investments, particularly in Asia and the Middle East, and the importance of understanding the unique challenges they present in arbitration.
