WASHINGTON – U.S. Senators Joe Manchin (D-W.Va.) and John Kennedy (R-La.) recently introduced legislation that would stop foreign entities and governments from funding litigation in American courts.
The bipartisan Protecting Our Courts from Foreign Manipulation Act of 2023 was introduced in September. It is aimed at third-party litigation funders.
“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,” 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.
U.S. Sen. John Kennedy (R-Louisiana)
| kennedy.senate.gov/
“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.”
Kennedy agreed.
“Leaving our courts unprotected from foreign influence – such as from China – poses a major risk to U.S. national security,” he said. “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.”
Earlier this year, Kennedy asked U.S. Supreme Court Chief Justice John Roberts and U.S. Attorney General Merrick Garland to take action to mitigate the threat foreign actors such as China pose by covertly funding litigation in U.S. courts.
Third-party litigation funding 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. It has been called a national security risk because large volumes of foreign-sourced money could be pouring into U.S. litigation, allowing a foreign government to advance its strategic interests against the U.S. through litigation.
For example, the federal government has taken action to limit foreign access to certain types of U.S. technology. But there is no measure currently in place to prevent foreign adversaries from using this method to circumvent existing safeguards by using the discovery process in litigation to obtain critical information about U.S. technology.
If passed, the act would require disclosure from any foreign person or entity participating in civil litigation as a third-party litigation funder in U.S. federal courts. It also would ban sovereign wealth funds and foreign governments from participating in litigation finance as a third-party litigation funder, either directly or indirectly. And, it would require the Department of Justice’s National Security Division to submit a report on foreign third-party litigation funding throughout the federal judiciary.
Representative Mike Johnson (R-La.) introduced companion legislation in the House.
The proposal already has drawn support.
“The U.S. Chamber of Commerce applauds Sens. John Kennedy and Joe Manchin and Rep. Mike Johnson for introducing this landmark bill, and we urge Congress to quickly pass it to protect consumers, businesses and U.S. national and economic security,” said Harold Kim, president of the U.S. Chamber of Commerce Institute for Legal Reform. (The ILR owns The West Virginia Record.) “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.”
It also has the support of the R Street Institute, a non-partisan, center-right Washington-based think tank which aims to "engage in policy research and outreach to promote free markets and limited, effective government.”
“The R Street Institute is excited to support and endorse Senator Kennedy’s legislation that will shine a light on the shadowy funders of third-party litigation, and limit the ability of foreign governments to negatively impact various U.S. industries by tying them up in anonymous third-party litigation,” said Anthony Lamorena, senior federal affairs manager. “The current third-party litigation funding laws lack much needed transparency, and they could open the door to foreign entities detrimentally impacting our national security.
“We applaud the Senator for his leadership on this issue, and we urge more lawmakers to join him in this effort.”