Third-party litigation funding poses a threat to our economic and security interests. It involves hedge funds and other financiers investing in lawsuits. These entities “invest” in lawsuits in exchange for a percentage of any settlement or judgment.
According to a recent Newsweek report: “In most American courtrooms today, a party in court could be financed by foreign interests (and other unrelated third parties) without the other party ever knowing it.”
There are few guardrails or limits on this type of lawsuit funding, and many states’ ethics rules that might rein these suits in have been watered down, eliminated, or simply don’t exist.
These sorts of lawsuits also pose considerable risks to our national security. Litigation experts, federal lawmakers, business and trade associations, and even former military generals are expressing concerns about the lack of transparency in third-party litigation and what these lawsuits could mean for our economic interests as a nation and our national security.
Charles Silver, a professor at The University of Texas School of Law, and his co-author Georgetown University Law Center’s David A. Hyman, noted, “Because third-party litigation funding allows funders to use litigation to advance their own interests, funders with ties to foreign countries/adversaries may see litigation as a vehicle for acquiring secrets, and harming U.S. national and economic security interests.”
Our civil justice system should never be a vehicle for greed and security risks. Anything that threatens fairness and access to our courts, such as the types of lawsuits and lack of transparency surrounding third-party litigation funders, deserves our attention.
Litigation funded, generated, and controlled by outside interests – especially those in countries and governments that pose significant national security concerns – can harm our state and nation.
Requiring greater transparency around who is behind third-party litigation is a critical reform that deserves bipartisan support at the state and federal levels.
