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Jul 1, 2025  |  
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Thomas Stratmann


NextImg:What happens to America when foreigners fund our lawsuits?

As Congress weighs new legislation to expose the shadowy world of litigation funding, a troubling picture is emerging.  Foreign adversaries and Wall Street investors are weaponizing American courts against our own companies, and everyday consumers are paying the price.

Third-party litigation funding lets financial firms bankroll lawsuits in exchange for a cut of any winnings.  What started as a niche investment strategy has exploded into a multi-billion-dollar industry operating in the shadows.  This isn’t just about hedge fund profits anymore; it’s become a clear and present danger to our economic and national security.

Sen. Thom Tillis (R-N.C.) and Rep. Darrell Issa (R-Calif.) have introduced legislation requiring disclosure of these funding agreements.  As Tillis puts it, “foreign entities shouldn’t be allowed to meddle tax-free in the American legal system.”  He’s right to be concerned.  With virtually no disclosure requirements today, nothing stops adversarial governments from weaponizing our own courts against American businesses.

Think about what’s happening: Major hedge funds, private equity firms, and even sovereign wealth funds now treat our courtrooms like casinos.  They scout for promising lawsuits, inject capital to fuel lengthy legal battles, then collect their payday, sometimes 20–40% of any settlement.  Georgia got so worried about foreign manipulation that it recently banned foreign governments from financing litigation in the state.

The energy sector has become ground zero for this problem.  Anonymous financial backers fund lawsuits against companies trying to build the infrastructure America desperately needs.  Just when we should be achieving energy independence, these shadowy arrangements are undermining our goals.

Here’s what this means in practice: Energy companies that should be investing in new power plants and pipelines are instead burning money on legal defense.  Those resources get diverted from productive projects into lawyers’ fees and Wall Street profits.

The math is stark: Every dollar spent fighting funded litigation is a dollar not spent building the energy infrastructure America needs.  The result?  Higher costs for working families, delayed critical projects, and a systematically weakened domestic energy sector precisely when national security demands the opposite.

This problem goes far beyond energy.  Companies across industries now have to budget for legal warfare funded by anonymous investors who have no real stake in the underlying disputes.  It’s creating a hidden tax on innovation that gets passed along to consumers in higher prices.

The consequences are real: When drug companies get tied up in funded litigation, new medicines get delayed.  When tech firms have to divert money from research to legal defense, innovation slows down.  When infrastructure projects get killed by Wall Street-backed lawsuits, communities lose out on jobs and growth.

Unlike regular investors who have to disclose their stakes, litigation funders operate in complete secrecy.  We have no idea who’s actually driving major lawsuits or what their real motives are.  Are environmental groups genuinely trying to protect nature, or are they fronts for foreign competitors looking to kneecap American energy companies?  Without transparency requirements, we’re flying blind.

Are these environmental lawsuits really about protecting nature, or are they just investment vehicles designed to squeeze out maximum returns?  Are class-action suits actually helping consumers, or are they profit schemes designed to drain resources from productive American companies?  When foreign sovereign wealth funds can secretly bankroll litigation against our businesses, these aren’t just legal questions, they’re matters of economic warfare.

Congress needs to pass the pending transparency legislation now.  Courts should require disclosure of who’s funding lawsuits, especially when foreign money is involved.  We also need to close the tax loopholes that let foreign funders profit from American litigation while dodging U.S. taxes.

Federal judges also need to start considering the bigger picture when anonymous funders drag out cases that should settle quickly.  Right now, we have a system that forces American businesses and consumers to bear the costs while Wall Street speculators and potentially hostile foreign governments reap the profits.  That’s backwards.

The bottom line is this: American families and businesses are getting squeezed by a litigation funding system that puts investor profits ahead of the public interest.  Every funded lawsuit that delays infrastructure projects or forces companies into expensive legal battles shows up in your utility bill, at the gas pump, and in the prices you pay for everything else.

It’s time to shine a light on Wall Street’s shadow game and shut the door on foreign manipulation of our courts.  The stakes are too high and the costs too real to let this continue.  Our legal system should serve American justice and American interests, not hedge fund profits or foreign adversaries looking to weaken us from within.

Thomas Stratmann is a senior research fellow and distinguished university professor at George Mason University.  He is a professor of economics in the Department of Economics and holds a courtesy appointment at the Antonin Scalia Law School.

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