The Chinese Communist Party has utilized a variety of tools at their disposal to manipulate American public opinion as they see fit. This includes recent headlines from Fox News surrounding their utilization of a Wuhan tech company to attack government officials and businesses. Beijing’s leaders are now quietly making major investments into the third-party litigation funding industry to diversify their methods of influence. Leaders in Washington must support the passage of transparency legislation to address the foreign manipulation of our judicial system.
For some time now, foreign investors and private equity firms have helped finance cases attorneys would otherwise immediately dismiss. In exchange, third-party funders get a cut of the case’s settlement money, all without having to report their involvement to the public. Data analytics firm LexisNexis finds that billions of dollars are siphoned into this industry every year, with none of these investments being disclosed to any of the parties.
These arrangements have allowed foreign entities to weaken the foundation of our civil litigation process, the client-attorney relationship. Rather than fully backing their claimant, attorneys have given outside financiers increased authority over a case, as they are paying the attorneys to begin with. This conflict of interest leads third-party funders to make imprudent decisions that only benefit themselves.
Outside funders have looked to use their influence on third-party litigation for nefarious reasons. According to the Swiss Re Institute, they seek to draw out the length of a case for an average of 15 additional months, even if all other parties prefer a practical settlement decision. Asset management firm Burford Capital is a prime example of this, as they chose to sue their own client to try and secure a greater financial return. Burford even tried to prevent their client from selecting a different law firm they weren’t happy with. According to Bloomberg, Burford’s actions led the judge supervising the case to say that they had caused an “enormous” litigation burden on the parties involved.
Moreover, these actions are financially painful for businesses, as it forces them to shell out more money on litigation liability expenses. The aforementioned research from the Swiss Re Institute finds that this includes spending 20% more on insurance costs, rather than on hiring new employees. Consumers also lose out, as they face higher costs for goods and services at a time where the Biden administration has been unable to tame inflation.
Worse yet, this industry is now being flooded with foreign investment that seeks to weaken our economic and national security interests. This was clear in a bipartisan report from the House Select Committee on Strategic Competition between the United States and the Chinese Communist Party, which pointed out how China and other foreign adversaries could gain access to “sensitive IP through funding third-party litigation.” The Wall Street Journal reported how Intel Corporation, a key business for both our economy and national security, has already dealt with this scenario after foreign entities filed third-party patent litigation that cost them billions of dollars in damages.
This is why Senator Vance and other Ohio GOP leaders need to push Congress and pass legislation to enhance transparency into the third-party litigation process. It would prevent foreign governments like China from toying with our legal system right under our noses. It’s time we secure our courts, economy, and national security by enacting transparency laws.
