Senators John Kennedy (R-La.) and Joe Manchin (D-W.Va.) recently introduced the Protecting Our Courts from Foreign Manipulation Act of 2023. The legislation aims to stop foreign entities and governments from funding litigation in America’s courts. 

Foreign Involvement in the U.S. Court System

We all know the United States is a litigious country with courts often backed up for years. However, few consider who is funding the lawsuits being filed. Currently, there are few protections in place to prevent foreign actors from funding targeted lawsuits in the United States. As a result, foreign entities have contributed billions of dollars in litigation financing in order to achieve a particular outcome in a case. 

While the funds are difficult to track, it is likely that some of the companies providing the funding are connected with hostile foreign governments. These targeted lawsuits can harm U.S. industry and undermine national security.

State Attorneys General and Trade Groups Express Concern

For years, state Attorneys General and trade groups such as the Chamber of Commerce have sounded the alarm about foreign litigation funding. In 2022, a group of 14 state attorneys general warned of what they called potential economic and national security threats posed by investments in U.S. lawsuits by “foreign adversaries.”

In a letter addressed to U.S. Attorney General Merrick Garland, the state attorneys general asked the U.S. Department of Justice to describe what the federal government “has done or is currently doing to address these concerns” related to the practice known as third-party litigation funding.

State Action

While the federal government has yet to act on this alleged problem, some states have taken action. For example, New Jersey in 2021 U.S. District Court for the District of New Jersey Chief Judge Freda Wolfson signed an order amending the court’s local rules to require parties in litigation to disclose information about non-parties that provide non-recourse funding for attorneys’ fees and expenses.

Protecting Our Courts from Foreign Manipulation Act

The Protecting Our Courts from Foreign Manipulation Act attempts to protect the U.S. legal system requiring greater transparency and accountability from third-party groups. It also blocks third-party litigation funding from foreign states and sovereign wealth funds.

Specifically, 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.
• Ban sovereign wealth funds and foreign governments from participating in litigation finance as a third-party litigation funder, either directly or indirectly. 
• Require the Department of Justice’s National Security Division to submit a report on foreign third-party litigation funding throughout the federal judiciary.

A companion to this legislation has been introduced in the House of Representatives, and the bill has the support of industry groups such as the Chamber of Commerce.

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