A bipartisan effort in Congress is underway to shine a spotlight on the secretive world of third party litigation funding (TPLF). Sens. John Kennedy (R-LA), Joe Manchin (D-WV), and Rep. Mike Johnson (R-LA) recently introduced The Protecting Our Courts from Foreign Manipulation Act of 2023, which would require transparency to courts, to the parties, and to the Department of Justice when foreign persons and entities invest in U.S. litigation and would prohibit foreign governments and sovereign wealth funds from investing in U.S. litigation.
TPLF is a multibillion-dollar, global industry that allows hedge funds and other outside financiers to invest in a lawsuit in exchange for a cut of any settlement or award. Recent ILR research, A New Threat: The National Security Risk of Third Party Litigation Funding, found that large volumes of foreign-sourced money could be pouring into U.S. litigation against American companies, allowing a foreign government to advance its strategic interests against the U.S. through litigation in a variety of ways.
By fostering strategic litigation against targeted U.S. companies or entire sectors, a foreign adversary could realize a range of objectives, whether advantaging their own competing industries, accessing sensitive information through the litigation process, or degrading the U.S. economy and weakening its national security.
For example, while the federal government has taken action to limit foreign access to certain types of U.S. technology, there is no measure currently in place to prevent foreign adversaries from using TPLF to circumvent existing safeguards by using the discovery process in litigation to obtain critical information about U.S. technology. If it is ultimately signed into law, the Kennedy-Manchin-Johnson legislation would be the first to enact national safeguards to protect against this and other harms presented by the opaque nature of the TPLF industry.
ILR President Harold Kim released a statement in support of the bill:
“For far too long, the litigation funding industry has operated in secret. Judges, the parties, and the Justice Department should know if foreign-sourced money is being poured into U.S. litigation against American businesses in exchange for a cut of the settlement or award. The Protecting Our Courts from Foreign Manipulation Act also will help limit the ability of foreign governments to weaponize our court system against U.S. national and economic security interests.”
“The U.S. Chamber of Commerce applauds Sens. John Kennedy (R-LA), Joe Manchin (D-WV), and Rep. Mike Johnson (R-LA) for introducing this landmark bill, and we urge Congress to quickly pass it to protect consumers, businesses, and U.S. national and economic security.”
Check out ILR’s page on third party litigation funding to learn more on how it’s moving our legal system away from one that resolves conflicts to a model driven by financial gain.
