National Security Harms: Third Party Litigation Funding Corrodes the Integrity of RulesBased Trade, the Rule of Law, the Justice Sector, and Open Mark

TPLF is not benign.

It is a growing risk to the national security of OECD member states and should be viewed properly as a lucrative illicit enterprise, and in some cases, state sponsored and commercial judicial criminality and terrorism that impacts the integrity of litigation and the justice system.

This is especially true as large foreign-sourced investments and sovereign wealth funds from China, Russia, and the United Arab Emirates (UAE), for example, are pouring into U.S. courts and those in some OECD member jurisdictions via TPLF and related lawfare cases, raise significant national, judicial, and economic security risks that imperil the rule of law and other important policy areas.

In the United States, malign forces including foreign actors, agents, and governments (or their proxies) continue to target and undermine U.S. national economic and security interests through the infiltration of the American litigation system. In fact, both the national security and intelligence communities in the United States have stated that U.S. adversaries such as China and Russia continue to leverage the full scope of their political, economic, and military power to pursue their own disruptive national security goals as part of today’s Great Power Competition.

The National Counterintelligence and Security Center has warned that “Russia and China operate globally, use all instruments of national power to target the United States, and have a broad range of sophisticated intelligence capabilities.”

In their recent annual threat assessments, the Office of the Director of National Intelligence (ODNI) has echoed the concerns of the U.S. intelligence community, noting that China uses “whole-of-government efforts to spread [its] influence, undercut that of the United States, drive wedges between Washington and its allies and partners, and foster new international norms that favor the authoritarian Chinese system”.

Similarly, ODNI has underscored that “Russia presents one of the most serious foreign influence threats to the United States, using its intelligence services, proxies, and wide-ranging influence tools to try to divide Western alliances, and increase its sway around the world, while attempting to undermine U.S. global standing, amplify discord inside the United States, and influence U.S. voters and decision[-]making.”

Given the concerted effort and enormous resources expended by foreign adversaries to pursue their national security goals, there is no reason to believe that exploiting litigation financing would be excluded from their hybrid warfare toolbox.

These governments, either directly or indirectly, may seek to exert control over the strategy and outcome of a case, or a portfolio of cases through anonymity, third-party proxies, through the use of strategic corruption, and through covert malign influence operations.

Accessing and exploiting the judicial process, such foreign adversaries can instigate such specious and non-meritorious litigation, influence strategy, and encourage and capitalize from commercial disputes involving American companies to obtain proprietary information regarding sensitive technologies in defense-military, technology, and other highly sensitive industries to provide advantage to their home industries.

They are able to gain intellectual property (IP), confidential documents, and trade secrets of U.S. and OECD member state institutions and companies, as well as, operational market strategies and innovations.

In the past year, there have been numerous public reports indicating, for example, how sovereign wealth funds and non-U.S. citizens are investing in U.S. litigation.

A recent Bloomberg Law report highlighted how Russian billionaires tied to President Putin were secretly pouring money into U.S. courts through TPLF. More specifically, the report informed how A1, a subsidiary of Russian financial giant Alfa Group, had funded lawsuits in New York and London, and at least a dozen cases in other parts of the world, using the TPLF judicial-business model as a way to avoid international sanctions.

Other reports have also informed how some Chinese-related investment firms and sovereign wealth funds have leveraged third-party litigation through many IP lawsuits in U.S. courts against some corporations to either profit financially, or to be sensitive trade information.

These newer market threats are among the reasons that the United States Congress have made it a priority to examine TPLF and related harms more closely including at yesterday’s hearing by the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet with respect to intellectual property (IP) litigation financed by third party investors and foreign entities, including the impact of those developments on the U.S. IP system and our national security.

As I underscored at our recent plenary meeting of the OECD Working Party on Countering Illicit Trade (CP-CIT), the harms and impacts posed by TPLF to the rules-based international trading system, the rule of law, and market integrity, will only increase and imperil our trade and economic security agenda in the coming years.

Frankly, no industry sector is immune and all points in the global trade supply chain are vulnerable. On one side of this litigation are the makers and innovators and legitimate traders – businesses across all industry sectors that develop new products, create jobs, drive trade, and help drive our economies forward.

On the other side are anonymous shell companies, often supported by non-transparent financial actors that, at best, free-ride on the global trading system or, at worst, allow transnational organized crime or malign state influencers to operate under a cloak of apparent legitimacy.

Remarks were delivered on June 13, 2024 at a webinar co-hosted by the OECD and Business at OECD (BIAC) entitled, “Exploitation of IP Frameworks and Rules-Based Trade: Investor Funded Litigation Contributes to Illicit Economies and Damages Innovation and Market Integrity”.

Find full remarks of David M. Luna on TPLF and Impacts to National Security :

https://icaie.com/2024/06/national-security-harms-third-party-litigation-funding-corrodes-the-integrity-of-rules-based-trade-the-rule-of-law-the-justice-sector-and-open-markets/

David M. Luna, Chair, Business at OECD (BIAC) Anti-Illicit Trade Expert Group (AITEG) CEO, Luna Global Networks & Convergence Strategies LLC; Executive Director, International Coalition Against Illicit Economies (ICAIE)

13 June 2024 Paris, France (Virtual Online)