U.S. Rep. Darrell Issa (R-CA-48) announced new legislation aimed at addressing the growing concern over foreign-funded third-party litigation financing (TPLF) in U.S. courts and the need for transparency in cases where foreign entities, including China-backed investors, are funding lawsuits.
The bill mandates the disclosure of any third-party investors who stand to profit from litigation outcomes, ensuring that the involvement of foreign powers like China is transparent to the public and the courts. Rep. Issa noted that the lack of transparency allows foreign actors to exploit the U.S. legal system for financial and strategic gain.
“Our legislation targets serious and continuing abuses in our litigation system and achieves a level of transparency that people deserve, and our standard of law requires,” said Issa.
China’s influence in this area has been highlighted by several cases, particularly intellectual property (IP) litigation. Recently, it was revealed that Shenzhen-based Purplevine IP, a China-backed entity, was financing IP lawsuits in the U.S., raising alarms over foreign interference in the American legal process. A federal judge’s order to disclose the litigation funders in these cases unveiled the significant role of Chinese investors, which many believe poses a direct risk to U.S. national security.
Sen. John Kennedy (R-La.), who has introduced companion legislation in the Senate, echoed these concerns, stating, "Leaving our courts unprotected from foreign influence—such as from China—poses a major risk to U.S. national security."
Former acting director of the U.S. Patent and Trademark Office, Joe Matal, added, “The disclosure of a litigation funder tied to China is our worst fears confirmed. Anything China does is concerning because nothing over there is really independent.”
The introduction of this legislation comes on the heels of mounting concerns from lawmakers and industry leaders alike, including 14 state attorneys general, Senate Intelligence Committee Vice Chairman Senator Marco Rubio, and Ranking Member of the Subcommittee on Federal Courts Senator John Kennedy. All have called for greater scrutiny of foreign-backed entities manipulating the U.S. court system for their own benefit.
Industry groups have also rallied behind the bill, with organizations like the National Association of Mutual Insurance Companies (NAMIC) stressing that foreign-funded frivolous litigation has driven up costs for Americans and compromised economic fairness.
According to a SwissRE report, the litigation funding market has expanded rapidly, growing by 44% from 2019 to 2022, and is projected to continue at a compound annual growth rate of 8.7% from 2020 to 2028.
According to a Bankrate report, Third-party litigation funding (TPLF) is a billion dollar industry that involves third parties such as hedge funds investing in lawsuits in exchange for a share of the settlement or award.
