In the United States of America, litigation is very expensive. Most people struggle to bear to get their finances together during legal claims which obstruct them in their attempt to access justice.
Third-party litigation funding has allowed individuals and business entities to pursue their meritorious claims without worrying about financial constraints. Litigation finance is safe and plays a significant role in ensuring access to justice for all and has received appreciation from the general public, which reflects in the increasing market share of these companies.
In the U.S., litigation finance is worth billions of dollars, and its market share will rise with time. With growing market share and popularity, very few stakeholders are demanding regulating the industry and claiming different grounds for strict regulations that ultimately advantage multi-billion dollar insurance companies against financially disadvantaged claimants.
In the most recent development, the U.S. Chamber of Commerce has published a report which demands regulation of third-party litigation funding, falsely claiming that foreign actors could use the investments in U.S. lawsuits to undermine national security.
Let’s take a look into how FARA does not apply to litigation funding and how the Chambers’ claims are false.
The U.S Chambers baseless speculation ultimately advantages insurance corporations against financially burdened plaintiffs.
It is not the first time the U.S. Chamber of Commerce has demanded regulation of the litigation finance industry. On multiple occasions, it has aggressively asked for a legislative and regulatory mechanism to disclose information about litigation funding.
All these efforts have failed to bear fruit, and the legislative bodies have not enacted any disclosure requirement. Most courts of law have also adopted restraint, and only a handful have adopted disclosure rules.
The latest false claim of the Clambers against litigation funding.
Although investors are not provided specific details about the cases they invest in, the latest report by the Chamber’s Institute for Legal Reforms argues that litigation funding could threaten the United States’ national security. It falsely claims foreign adversaries can infiltrate the American litigation system by investing in court cases and are senselessly reporting that the enemy may get access to confidential details of corporate entities of the U.S. and use privileged information against the interests of the country.
Again, although investors do not have access to the lawsuits they invest in, the Chamber’s report also states that foreign enemies can use funding agreements to seek control over a case’s strategy and gain access to sensitive corporate information by funding specific cases that suit their interests. They preposterously claim these foreign agents can use the information to influence U.S. politics, which is against the states’ national security.
How \ FARA does not apply to litigation finance.
The Foreign Agent Registration act does not apply to litigation funding for many reasons. First and foremost, most of the investors in litigation funding are domestic hedge funds, banks, and private equity funds.
Additionally, just because a foreign investor, such as a nation’s sovereign wealth fund, is invested into a business, it does not automatically require registration under FARA. Many large companies, such as Meta, Uber, and Alphabet (Google), have such investors, and there have been no cries from the public about such information. These investors have access to some information even though most people would say that such information is much more enticing to a foreign intelligence service.
The Chambers’ proponents of FARA registration for litigation funding investors typically do not mention that since litigation funding is a non-politically focused industry, investors would be exempt from registration anyway. Additionally, the act itself allows exemptions for foreign lobbyists, which seems counterintuitive to its core purpose of undue influence in the United States economy.
Yet, the Chambers still struggle to force the disclosure of litigation funding agreements to the extent that they have requested the U.S. President to issue an executive order to force foreign states to disclose their association if they are involved in funding litigation against U.S. companies.
What the Legal Finance Association thinks of the Chambers’ latest attempt to interfere with an industry that helps the disadvantaged.
The defenders of litigation finance have criticized the U.S. Chamber of Commerce report and rejected the proposals to limit or disclose information.
Gary Barnett, executive director of the International Legal Finance Association, stated, “The Chamber report is light on substance and heavy on speculation and preconceived notions.” The regulation of litigation funding will create unnecessary hurdles for the parties in access to justice, which is a fundamental right guaranteed by both international and domestic legislative instruments of the U.S.A. Litigation funding contributes to the administration of justice; therefore, all stakeholders should support the industry.
The courts of law and other law enforcement agencies in the U.S. are well equipped to track any foreign intervention in its policies. Similarly, the courts of law can handle matters related to litigation finance and protect sensitive information in litigation.
Furthermore, the recommendation of the Chamber’s lack of substance is merely an apprehension based on conjecture and cannot be a valid ground to restrict an industry that is contributing to the administration of justice in the country and serving the interests of meritorious claimants who otherwise would not be able to pursue their claims due to financial constraints.
The Chambers’ ludicrous claim tells you which side they are on and is not the one of the American plaintiffs.
The fact that anyone thinks that bad-faith foreign actors somehow utilize the litigation funding industry for nefarious reasons is ludicrous. Most importantly, litigation funding companies bear absolutely no ability to influence the litigation they invest in. In addition, there is no benefit for a foreign state to invest in litigation funding since investors are not provided specific details about each individual case that a funding company invests in.
Sovereign wealth funds invest in numerous different industries and asset classes. They are not investing in US-based companies as part of some harebrained intelligence mission. They are investing in US-based companies to increase returns in their portfolios as well as diversify their investments.