Tackling Foreign Manipulation: The Urgent Need for Reform in Third Party Litigation Funding 

Today, litigation funding is being exploited by foreign entities to manipulate legal systems and undermine national and economic security. ILR and other commentators have been warning about these…

Today, litigation funding is being exploited by foreign entities to manipulate legal systems and undermine national and economic security. ILR and other commentators have been warning about these dangers. It is becoming increasingly clear that policymakers need to implement reforms to protect the integrity of the judicial process from foreign entities who are trying to advance their agenda.  

On March 28, Bloomberg Law published an explosive article exposing an investment firm established by Russian billionaires with close connections to Vladimir Putin that has funded lawsuits globally, including in the U.S., all while working to evade international sanctions. The article reveals that A1, a subsidiary of the Russian conglomerate Alfa Group, has funded lawsuits in New York and London prior to and following sanctions imposed on three of its billionaire founders in the wake of the 2022 Ukraine invasion.  

A senior attorney for A1 is even quoted as saying that A1 is funding at least a dozen cases around the world, including admitting to having been involved in a bankruptcy case in New York. 

ILR’s Senior Vice President for Legal Reform Policy, Matt Webb, was quoted in the article driving home the dire threat that TPLF poses. “A1’s actions are an example of the problems that arise when foreign entities can finance litigation,” said Webb. “There’s a very, very real national security and economic security threat to the U.S. and to U.S. companies when foreign-based funding is present.” 

Recently, the chief of the Foreign Agents Registration Act (FARA) Unit at the Department of Justice (DOJ), Evan Turgeon, raised a red flag regarding the strategic implications of foreign TPLF at a national forum on FARA. He highlighted the potential for foreign entities to weaponize litigation, gain access to sensitive information through discovery, and sow discord among the American public. He also noted that foreign litigation funding could be reportable already under existing FARA requirements, and announced the DOJ’s intention to scrutinize foreign litigation funding as well as the activities of sovereign wealth funds that promote the political or policy goals of foreign governments.  

In addition, the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party (Select Committee) released a report that outlines a strategy to fundamentally reset the U.S.’ economic and technological competition with the People’s Republic of China. Among the Select Committee’s bipartisan recommendations are two related to TPLF:  

  • Determine and establish what safeguards are needed to prevent foreign adversaries from obtaining intellectual property through TPLF.   
  • Require enhanced disclosures of foreign adversary funding of litigation in federal court.  

As government attention shifts towards TPLF, a wave of new legislation is emerging nationwide. One example is the bipartisan Protecting Our Courts from Foreign Manipulation Act of 2023 (POCFMA), introduced in Congress to combat foreign interference in the U.S. legal system. This groundbreaking legislation aims to: 

  • Require disclosure of any foreign persons or entities funding litigation in the U.S.  
  • Prohibit sovereign wealth funds and foreign governments from funding U.S. litigation.  
  • Require the DOJ to submit to Congress an annual report on the scope of foreign TPLF in the federal courts.  

Moreover, state-level laws in Indiana and West Virginia have made notable strides to bring transparency to the secretive TPLF industry. Recently, both states’ legislatures advanced reform proposals with strong bipartisan support. On March 13, Indiana’s Governor Eric Holcomb signed into law HB 1160, and on March 27, West Virginia’s Governor Jim Justice signed SB 850 into law. 

It is crucial for government officials to address the vulnerabilities in our legal system that foreign adversaries use TPLF to exploit, compromising U.S. economic and security interests. By implementing transparency measures and enacting other essential reforms, we can ensure the integrity of our legal system and safeguard our national interests.