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Heading Off a Chinese Lawfare Espionage Deluge

Posted on Thursday, May 23, 2024
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When typhoons beckon, you check your defenses to guard against disaster. One potential Chinese typhoon-level threat would be Chinese lawfare-empowered espionage and the pursuit of extraterritoriality.

One near-term defense against such legal attacks would be the exposure and prevention of Chinese involvement in third-party litigation funding (TPLF).

This is an annual $2.5 billion to $5 billion “industry” in the United States (estimated $13.5 billion worldwide), where companies or anonymous entities “invest” in lawsuits knowing they will receive a part of the “winnings” or settlements.

In addition, third-party funders could take over litigation strategies, sidelining plaintiffs in pursuit of hostile goals.

American companies facilitating TPLF defend their service as a necessary resource for poor plaintiffs who can’t afford expensive lawsuits against wealthy corporations — that can also pay large settlements.

So far, no regulations are exposing or preventing potentially hostile exploitation of TPLF, such as investments by Chinese or other entities seeking to damage U.S. targets or conduct “legal espionage” via legal processes of “discovery.”

China’s potential to exploit TPLF for espionage goals derives from its status as the greatest espionage threat to the United States.

Chinese theft of intellectual property makes Americans “the victims of what amounts to Chinese theft on a scale so massive that it represents one of the largest transfers of wealth in human history,” FBI Director Christopher Wray said in a July 2022 speech before the Hudson Institute in Washington.

The April 19 formation of the People’s Liberation Army Cyberspace Force as an independent arm of the PLA will serve to accelerate the PLA’s conduct of cyber espionage and cyber warfare.

This new PLA arm will compete with intelligence organs like the Ministry of State Security, which sponsors hacking groups like APT41, which the Boston-based Cybereason cybersecurity firm reported in 2022 stole “trillions” of dollars worth of intellectual property.

There are already indications that Chinese entities could use America’s legal system and TPLF to advance espionage or other hostile goals.

In a November 2023 report, Bloomberg Law revealed that the Chinese-based patent service firm Purplevine IP was “paying the costs” for intellectual property lawsuits in U.S. courts. These IP cases concerned earbuds, tablets and smartphone technology. However, there is potential for Chinese companies or other entities to fund lawsuits of a more ominous nature.

In January 2023, Louisiana Senator John Kennedy informed Attorney General Merrick Garland of his concerns over “adversaries” like China and Russia exploiting TPLF to fund frivolous lawsuits that could weaken critical industries.

China is creating a larger legal front that could result in attempts to use America’s and other democracies’ legal systems against their interests.

For example, China has sanctioned several U.S. military companies, most recently on April 11, freezing the assets of General Atomics Aeronautical Systems and General Dynamics Land Systems for recent arms sales to Taiwan.

There is little to stop a concerted Chinese campaign to fund harassing lawsuits against U.S. military companies selling weapons to Taiwan, including previously sanctioned crucial contractors like Lockheed Martin and Northrop-Grumman, that could also yield militarily useful intelligence.

In the catastrophic event that China conquers Taiwan, third-party litigation funding would offer a tool for China to fund loyal Chinese abroad to legally challenge new Taiwan governments in exile, perhaps claiming their property as belonging to the People’s Republic of China.

Thankfully, there are proposals to address the threat of foreign-funded TPLF, including a 2023 bill introduced by Kennedy and Sen. Joe Manchin of West Virginia. Their Protecting Our Courts from Foreign Manipulation Act would require disclosure of foreign persons or entities participating in third-party litigation funding in federal courts, ban foreign sovereign wealth funds and foreign governments from participating in TPLF, and require the Justice Department to report on foreign TPLF through the federal court system.

As China’s comprehensive national power grows, as it increasingly dominates global commerce, and as it builds political influence globally, it will pursue political, economic, military and legal means to contain its enemies, the United States and its allied democracies.

Curtailing China’s options to leverage the U.S. legal system via strategies like TPLF — and demanding transparency that exposes foreign hostile actors — and regulations that bar their activities are necessary measures to avoid a legal deluge.

Richard D. Fisher is a senior fellow with the International Assessment and Strategy Center.

Reprinted with Permission from DC Journal – By Richard D. Fisher

The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.

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