
The instrument of status is the contract, and that is a thing, not a person. Thus the troops are assets, and not employees or subjects. Rowri really has no legal authority over them, except provided by the contract. He cannot "dispense justice" as he has no recognized authority.
So, stay on your track for just a moment. Let's look at this from the Big Dips perspective. The Baron who he has been detailed to negotiate with seems iffy. Sending out the Guard, building a nothing port, etc. Eccentric, but still something to work with. The man then looses assets based on his own very poor judgement. If he's a grown-up, he deals with it. If he insists on ordering death or demanding that his lost equipment be returned, even though he lost them due to his own ineptitude, then he is literally outside the bounds of sanity.
Now, from a negotiation perspective, if the Baron is sane then the Big Dip has a stronger negotiation position. The Baron's defenses are nearly non-existent and the Dip's are marginally stronger. A gentleman's agreement that the Baron gains the advantage of SEMC protection during the negotiations strengthens the Dip's position. On the other hand, if the Baron is not sane, then the Dip has the option of dealing with whomever best controls Inchin. Obviously an insane person is going to be short lived, and whatever concessions the Imperials need will not be upheld when dealing with an insane individual.
From the Baron's perspective, assuming sanity, the wounded and captured clearly couldn't hold up to real soldiers. No longer being financially responsible for them saves him from throwing good money after bad.
From the remaining Guard position, they see the SEMC looking out for allies when things are bad. The captives and wounded might not have been great friends, but there's a hope they might survive the next week or so.
Realistically, everyone benefits from the SEMC keeping the wounded and captives.