When a company gets hauled into a major trade investigation, the assumption is that the opposing party is driving the case. Increasingly, that’s not the whole story. Third-party litigation funders are outside investors who bankroll lawsuits in exchange for a cut of the winnings. They are playing an outsized and largely invisible role in some of the most consequential proceedings in U.S. trade law, and under current rules, nobody has to disclose it.
The U.S. International Trade Commission is looking to change that. The agency recently proposed a rule requiring parties in Section 337 investigations to disclose when outside funders are involved. ILR filed comments last week in support, with recommendations to make the rule even more effective.
The stakes here go beyond basic fairness. When foreign-backed funders tied to sovereign wealth funds or entities from adversarial nations can quietly finance U.S. trade proceedings, they gain access to sensitive commercial information and potential leverage over American industries. As ILR has long maintained, transparency in litigation funding is a prerequisite for a fair and trustworthy legal system, and the ITC’s proposal is a meaningful step in that direction.
That said, the draft rule has gaps worth closing. The proposed exemption for “loans” is undefined, leaving open the possibility that high-interest, non-recourse arrangements could be structured to avoid disclosure. ILR recommended capping the exemption at interest rates no more than four points above the Wall Street Journal Prime Rate. The rule also asks only for descriptions of funding agreements, but ILR argues the actual agreements themselves should be produced, with protective orders available where warranted. ILR’s comments also urge the ITC to modify the rule to limit its stock ownership disclosure requirement to entities owning 10% or more of a party’s shares. This fix would make the rule in line with a similar requirement in the federal courts. Finally, the rule’s scope should extend to parallel civil litigation, not just in the ITC proceeding itself, since funders rarely limit their influence to a single forum.
This is part of a broader push for TPLF transparency across the legal system. Congress has taken up the issue, and ILR has advocated for similar disclosure requirements in the federal courts as well as at the state level. The ITC now has an opportunity to set a strong standard of its own. ILR’s comments make the case for getting it right.
Read ILR’s full comments here.
