Earlier this month, Senator Chuck Grassley (R-Iowa) introduced the Litigation Funding Transparency Act of 2026, which would impose significant new disclosure obligations on third‑party litigation funding in major federal civil actions. The bill applies to class actions, multidistrict litigation, and large coordinated federal proceedings involving one hundred or more cases. It reflects rising congressional concern about the influence of foreign sovereign entities, foreign individuals, and foreign‑controlled commercial enterprises in U.S. litigation. The transparency of funding sources in these types of proceedings has been an area of particular focus of the Foreign Agents Registration Act (“FARA”) Unit in the last several years.
The legislation requires parties to disclose the identity of any third‑party funder involved in a covered civil action. It also requires parties to state whether the funder is a foreign state, a foreign person, a sovereign wealth fund, or a commercial enterprise that is owned or controlled by a foreign entity. Parties must provide copies of any funding agreements to the relevant federal court and to all other named parties. These disclosures must also be transmitted to the Administrative Office of the United States Courts.
The bill creates a court‑centered reporting system that requires the Administrative Office to publish updates every one hundred twenty days identifying foreign funders disclosed in covered civil actions. The published information would include the cases in which the funders appear, the courts in which those cases are pending, and the amounts of funding provided. This requirement creates a new level of visibility into foreign involvement in U.S. civil litigation.
The legislation also prohibits funders from influencing litigation strategy, decision making, or settlement discussions. The bill authorizes courts to hold violators in contempt. It limits the ability of funders to access protected discovery materials unless they receive explicit authorization from the court.
If enacted, the bill would apply to all pending and future cases. Companies involved in class actions, multidistrict litigation, or other large consolidated matters should anticipate additional disclosure obligations and the likelihood of greater scrutiny of their opponents’ funding arrangements. The bill signals a broader trend toward transparency in litigation finance and growing attention to the national security considerations associated with foreign participation in U.S. legal proceedings.
In recent years, the Department of Justice’s FARA Unit has identified foreign‑funded litigation as a priority area for enforcement. In December 2023, FARA Unit Chief Evan Turgeon publicly warned that foreign litigation funding arrangements could be used to disadvantage U.S. companies and to advance foreign interests in U.S. courts, and he cautioned that such arrangements may fall outside the scope of key FARA exemptions. In June 2024, the FARA Unit issued an advisory opinion concluding that a U.S. law firm receiving funding from a foreign organization to pursue impact litigation was required to register under FARA and could not rely on the lawyers’ exemption or the commercial exemption. This opinion signaled a narrow interpretation of the lawyers’ exemption and confirmed that anonymous or foreign‑backed third‑party litigation funding may trigger FARA registration obligations. The introduction of the Litigation Funding Transparency Act appears to align with the FARA Unit’s recent priorities and reflects a coordinated focus on the national security risks associated with opaque foreign financial involvement in U.S. civil litigation.
We will continue to monitor this and related legislative activity.