Senators across the political spectrum are calling for transparency in third-party funding of litigations in U.S. courts, citing large amounts of “foreign-sourced” money pouring into U.S. civil suits against companies and industries that pose significant national and economic security threats.
“Foreign Third-Party Litigation Funding (TPLF) poses a threat to our judicial system as it allows for foreign actors, including adversaries, to represent their interests in U.S. courts,” the two senators wrote. “This is especially troubling as they are not parties in the suit.”
Lawmakers have a responsibility to safeguard the independence of the court and prevent the strategic advantages of the United States from falling into the hands of hostile foreign entities, they said. This responsibility includes the duty to protect the legal system from being used as a tool by foreign actors.
“Foreign actors such as China and Russia use third-party litigation funding to support targeted lawsuits in the United States, undermining our economic and national security,“ Mr. Manchin said. ”This legislation would provide a commonsense strategy to protect our legal system by requiring greater transparency and accountability from third-party groups and preventing foreign governments and sovereign wealth funds from funding litigation. I urge senators on both sides of the aisle to support this bipartisan bill to ensure that our federal courts are protected from foreign influence.”
Mr. Kennedy said: “Leaving our courts unprotected from foreign influence—such as from China—poses a major risk to U.S. national security. The Protecting Our Courts from Foreign Manipulation Act would put necessary safeguards in place to ensure that foreign nations, private equity funds and sovereign wealth funds linked to hostile governments are not tipping the scale in federal courtrooms.”
Multibillion-Dollar Stake
TPLF is a practice by which interests that aren’t directly engaged in a lawsuit provide funds to litigants in exchange for potential monetary returns from such litigation.According to the U.S. Chamber of Commerce Institute for Legal Reform (ILR), in recent years, TPLF has proliferated to such a degree that it permeates virtually every aspect of civil litigation in the United States. However, despite this proliferation, numerous courts remain unaware of this phenomenon, primarily because of the fact that TPLF arrangements don’t have to be disclosed and are seldom disclosed to the court.
“This threatens the U.S. judicial system by allowing foreign actors to represent their interests in U.S. courts, which is especially alarming, given that they are not parties in the suit,” Matt Webb, ILR’s senior vice president of legal reform policy, told The Epoch Times.
The federal government, for instance, has taken steps to restrict foreign access to some types of U.S. technology, but there’s no provision in the legal system to stop foreign adversaries from gaining access to sensitive information about U.S. technology through the discovery process in litigation.
The China Threat
While TPLF is a global phenomenon, it has been especially prevalent in the United States. According to Swiss Re, a reinsurance company, more than half of the $17 billion invested in litigation funds globally in 2020, for example, was pumped into the United States.Nevertheless, although U.S. courts have witnessed TPLF from the UK and Australia for many years, the recent disclosure of a Chinese interest paying for a suit in a U.S. litigation case has alarmed the senators and legal experts.
Reportedly, Staton Techiya filed a statement identifying PurpleVine IP Operating (Shenzen) Co. as a “Third-Party Funder with which it has made arrangements to receive funding for its attorneys’ fees and expenses to litigate this action on a non-recourse basis in exchange for a financial interest that is contingent upon the results of the litigation that is not in the nature of a personal loan, bank loan, or insurance.”
Staton Techiya revealed that “PurpleVine IP’s approval is not necessary for litigation or settlement decisions in this action” and that it “has no authority to make litigation decisions or settlement decisions.” According to Staton Techiya’s statement, PurpleVine IP “is a company organized under the laws of the People’s Republic of China.”
High Costs
“TPLF has a direct impact on U.S. businesses and consumers as well,” Mr. Webb said.The returns are attractive, too. TPLF investments have achieved internal rates of return of 25 percent or higher in recent years, beating even risky asset groups such as venture capital.
Hurdles
Still, despite the growing support from the lawmakers, the act must overcome several obstacles before it can be passed.“For one, the bill is in the early stage of the legislative process,” Mr. Webb said, and it could be changed during the legislative process, delaying or even preventing it from becoming law.
The bill could also attract opposition from lawmakers who disagree with its provisions or are swayed by outside interests.
If the bill is approved by the Senate, it‘ll be submitted to the House of Representatives for consideration, and if approved there, it’ll be sent to the president for signature before becoming law.
“We urge Congress [then] to quickly pass it to protect consumers, businesses, and U.S. national and economic security,” Mr. Kim wrote.
