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Litigation Finance and China’s Belt and Road Initiative

March 1, 2018

Litigation Finance and China’s Belt and Road Initiative

By Mauritius Nagelmueller China is building a multi-trillion dollar trade and infrastructure network – a new silk road – and the legal world is preparing for the disputes that will inevitably arise. What is the Belt and Road Initiative all about, and what impact will it have on litigation finance? Being one of the largest infrastructure and investment projects in history, the Belt and Road Initiative (BRI)[1] will alter the global economy and define China’s role in it. The initiative covers 65% of the world’s population in more than 68 countries, and 40% of the global GDP. An anticipated overall investment of USD 4-8 trillion will connect China with the rest of Asia, Europe and Africa, through six main geographic corridors and a Maritime Silk Road. China’s position is that BRI will improve the infrastructure along the route, providing a network of highways, railways, ports, energy and development projects for trade and cultural exchange. Chinese state-owned banks, the Asian Infrastructure Investment Bank (formed in 2015, but already encompassing 84 approved member states, and with a capital of USD 100 billion – half of the World Bank’s capital), the Silk Road Fund, and investors from the private sector are providing the necessary financing. About USD 1 trillion has already been invested. It seems likely that BRI, if successful, will shift more economic and political power to China. Major concerns surround the environmental impact of the vast project, uncertainties regarding the exact parameters and how much local economies will actually benefit. Security risks along the Belt remain constant. Some even fear a new Chinese “empire”. It remains to be seen which of these fears are justified, but it is interesting to note that China’s president Xi Jinping, who unveiled BRI in 2013 and made the initiative a central tenet of his foreign policy agenda, will likely remain in power, as the Communist Party of China just announced plans to abolish the two-term limit on the presidency. To predict that legal disputes will arise under BRI is to state the obvious, and the legal community in Asia and beyond is preparing accordingly. Jurisdictions are already competing for recognition as the prime venue for BRI related proceedings. In an effort to provide wide-ranging dispute resolution services, China plans to establish an international commercial court in Xi’an for disputes surrounding the land-based transport corridors, another in Shenzhen for the maritime route, and a central court headquartered in Beijing. All three bodies will provide arbitration and mediation services. China’s neighbors share its expectations regarding dispute resolution. In 2017, Hong Kong and Singapore permitted litigation finance in international arbitration, and the legalization for state court procedures may soon follow. Hong Kong passed its law shortly after a BRI Forum in Beijing, and partly also to strengthen its position as a go-to center for BRI related disputes, particularly for the maritime and construction fields. Arbitration institutions around the world, including the ICC (International Chamber of Commerce), SIAC (Singapore), and HKIAC (Hong Kong), encourage the adoption of their rules in BRI deals, and Malaysia’s KLRCA and Seoul’s KCAB are preparing accordingly. Chinese and Singaporean mediation centers (CCOIC and SIMC) have plans to cooperate for BRI related mediation proceedings, while Hong Kong is developing an online arbitration and mediation tool specialized on the initiative. Chinese officials have even publicly floated the concept of an innovative hybrid method combining aspects of arbitration and mediation, with courts playing a central role as well. Many legislators view litigation finance as a vital component in their jurisdiction’s status as a prime dispute resolution center, and litigation finance firms are aggressively seizing on the new opportunities presented. Select funders have already opened offices in Asia, others will soon follow, or plan to be involved from abroad. Entities who plan to invest along the Belt, including many Chinese companies, will not only face complex regulatory challenges, but also disputes with foreign governments, possibly in multiple jurisdictions. In addition to first-rate legal advice, parties will sometimes require external financing to pursue their claims under BRI. Both investors and law firms will utilize the benefits of litigation finance, and seek tailored financing solutions for their cases arising under BRI related projects. This will include single cases, as well as multiple disputes from investments being bundled into portfolios of claims. BRI will have a significant impact on litigation finance in the coming years, as a host of challenges and new opportunities present themselves. As has occurred previously, litigation finance will support meritorious claims which could not be brought without the assistance of external financing, help businesses and law firms diversify and boost their portfolios without increasing risk, and continue to promote access to justice. Litigation finance will benefit from this unprecedented trade and infrastructure initiative. It has already become part of the legal world, and it will soon be part of BRI. [1] Originally called One Belt and One Road Initiative.   Mauritius Nagelmueller has been involved in the litigation finance industry for more than 10 years.

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Senators Introduce Federal Legislation Mandating Disclosure of Third-Party Litigation Funding

By John Freund |

A bipartisan coalition of U.S. Senators introduced sweeping federal legislation on February 12, 2026, that would require mandatory disclosure of third-party litigation funding (TPLF) in class actions and multi-district litigation proceedings. The Litigation Funding Transparency Act of 2026, sponsored by Senators Chuck Grassley (R-IA), Thom Tillis (R-NC), John Kennedy (R-LA), and John Cornyn (R-TX), represents the most significant federal legislative push for TPLF transparency to date.

As reported in the U.S. Chamber Institute for Legal Reform, the legislation would mandate public disclosure of third-party litigation funding arrangements and the underlying funding agreements in federal class actions and MDLs. Critically, the bill would also prohibit funders from controlling decision-making or overall litigation strategy in these cases. The legislation includes specific provisions requiring disclosure of foreign funding sources, addressing growing national security concerns about foreign entities bankrolling American litigation.

"Outside financiers treat our court system like a casino. They drive up costs for consumers and put our national and economic security at risk," said ILR President Stephen Waguespack in response to the bill's introduction. The legislation includes exemptions for domestic nonprofit organizations providing services on a nonprofit basis and certain commercial enterprises expecting loan repayment.

The U.S. Chamber of Commerce and multiple industry groups have endorsed the legislation, emphasizing that transparency will hold litigators accountable and protect consumers from rising costs and delays caused by external financial influences. The bill text is available through the Senate Judiciary Committee, marking a potentially transformative moment in the ongoing debate over litigation finance regulation.

Commercial

Arizona Supreme Court Targets Out-of-State Legal Work

By John Freund |

Arizona is moving to tighten oversight of law firms that outsource legal work across state lines, signaling a renewed focus on the ethics and economics of cross-border legal services. The shift reflects broader concerns about client protection, unauthorized practice of law, and the evolving structure of modern law firms that increasingly rely on distributed teams.

An article in Bloomberg Law reports that the Arizona Supreme Court is advancing measures designed to limit the extent to which Arizona-licensed firms can “ship” legal work to lawyers in other jurisdictions. The proposed changes would require clearer disclosure when out-of-state attorneys handle matters for Arizona clients and reinforce rules around supervision and responsibility. Regulators have expressed concern that some firms may be leveraging lower-cost legal labor in other states without ensuring adequate oversight, potentially exposing clients to risk.

While outsourcing and multi-jurisdictional practice are hardly new phenomena, the court’s action underscores mounting scrutiny of how legal services are delivered in an era of remote work and alternative business structures. Arizona has been at the forefront of legal innovation, notably as the first US state to eliminate Rule 5.4’s ban on non-lawyer ownership of law firms. Yet this latest development suggests that innovation will be accompanied by guardrails aimed at preserving ethical standards and accountability.

For law firms operating nationally—or those backed by external capital—the message is clear: regulatory arbitrage may face increasing resistance at the state level. As alternative legal service models continue to expand, courts and regulators are likely to sharpen their focus on supervision, transparency, and client protection.

Commercial Regulatory Issues

CSAA Sees 2026 Shift in Litigation Finance Fight

By John Freund |

A senior legal executive at CSAA Insurance Group has signaled what she describes as a potential turning point in the long-running conflict between insurers and the litigation finance industry. Speaking amid heightened political and regulatory scrutiny of third-party funding, the comments reflect growing confidence among insurers that momentum is shifting in their favor after years of unsuccessful pushback.

An article in Insurance Business reports that CSAA’s chief legal officer argued that 2026 could mark a decisive phase in efforts to rein in litigation finance, citing increasing legislative interest and judicial awareness of the role funding plays in driving claim frequency and severity. According to the article, CSAA views litigation funding as a key contributor to social inflation, a term insurers use to describe the rising costs of claims driven by larger jury verdicts, expanded liability theories, and aggressive litigation tactics.

The executive pointed to a wave of proposed disclosure rules and transparency initiatives at both the state and federal levels as evidence that lawmakers are taking insurer concerns more seriously. These proposals generally seek to require plaintiffs to disclose whether a third-party funder has a financial interest in a case, a reform insurers argue is necessary to assess conflicts, settlement dynamics, and the true economics of litigation. While many of these measures remain contested, CSAA appears encouraged by what it sees as a shift in tone compared to previous years.

The article also highlights the broader industry context in which these comments were made. Insurers have increasingly framed litigation finance as a systemic risk rather than a niche practice, linking it to higher premiums, reduced coverage availability, and increased volatility in underwriting results. Litigation funders, for their part, continue to argue that funding expands access to justice and that disclosure mandates risk revealing sensitive strategy and privileged information.