New Federal Rule Bans Foreign Government Money in Lawsuits, Mandates Disclosure in All Ongoing Cases

This bill, the Protecting Our Courts from Foreign Manipulation Act of 2025, creates a massive new transparency and disclosure requirement for federal civil lawsuits. If you’re involved in a case, you now have to tell the court and the other side if any foreign person, foreign state, or sovereign wealth fund has the right to get paid based on the outcome of your case. This isn't just about disclosure; the bill specifically bans any agreement where payment contingent on winning the lawsuit comes, directly or indirectly, from a foreign state or a sovereign wealth fund. If you sign such an agreement, the bill makes it automatically void.

The New Paperwork Trail: Who’s Funding Your Fight?

If you or your lawyer have a third-party funder—meaning someone outside the case who gets a cut of the settlement or judgment—and that funder is foreign, you now have to hand over a lot of information. This includes the name, address, and citizenship of the foreign entity, and, crucially, a copy of the funding agreement itself. You have to submit this sworn disclosure within 30 days of signing the agreement or filing the lawsuit, whichever is later (Sec. 2). What makes this a huge deal is that this disclosure requirement applies even if the foreign money is funding a portfolio of cases handled by your law firm, not just yours. This means law firms that use foreign capital to bankroll large numbers of cases will have to pull back the curtain on their financing structure.

The Ban Hammer: No Foreign Government Money Allowed

Here’s the part that hits hard: The bill draws a clear line, making it illegal for any party or lawyer to enter into a funding agreement where the money comes from a foreign state or a sovereign wealth fund (SWF). Think of an SWF as a country’s massive investment fund, like Norway’s oil fund. If a law firm or litigant takes funding from one of these entities, that agreement is immediately void—it has no legal standing. This provision is designed to prevent foreign governments from using U.S. courts to wage economic or political battles under the guise of civil litigation. For a company involved in a major lawsuit, this means their opponent can’t be secretly backed by the deep pockets of a foreign government.

Real-World Risk: Penalties Apply to Ongoing Cases

If you fail to disclose this funding, or if you lie about it, the penalties are severe. The bill says non-compliance is treated exactly like failing to follow standard discovery rules, meaning you could face sanctions under Rule 37 of the Federal Rules of Civil Procedure. These sanctions can range from fines to having evidence excluded, or even having your case dismissed. The kicker? This new rule applies to any civil case that is already ongoing when the bill is signed into law (Sec. 4). If you’re currently in a federal lawsuit and have foreign funding, you need to comply immediately, or risk having the opposing side use this new rule to challenge your case and potentially get it thrown out. This creates a massive, immediate compliance headache for anyone involved in existing litigation that uses foreign funding.

The Government Gets a Look

Beyond the parties in the lawsuit, the Attorney General (AG) is also getting involved. The AG is required to submit an annual report to Congress detailing all foreign third-party litigation funding activities in federal courts (Sec. 3). This report must list the funders, where the money comes from (including specific countries), the total estimated dollar amounts, and what types of cases (e.g., patent, environmental, contract disputes) are being funded. This creates a permanent, high-level government monitoring system over foreign capital in the U.S. legal system, giving the government a clear picture of who is financing lawsuits and why.