AEA Leads Coalition Letter Urging Congress to Stop Foreign Third-Party Litigation From Targeting the American Energy Industry

WASHINGTON DC (6/22/26) – Today, a coalition of 21 organizations, led by the American Energy Alliance, sent a letter to House Speaker Mike Johnson and Senate Majority Leader John Thune urging Congress to close the tax loophole that allows third-party litigation financiers to claim capital gains treatment on their profits. The letter highlights how this practice harms taxpayers, consumers, and American businesses, drives up costs, and is being weaponized against the U.S. energy sector. A copy of this letter was also sent to the U.S. House Ways and Means Committee and the U.S. Senate Finance Committee.

American Energy Alliance President Tom Pyle released the following statement:

“Third-party litigation funding has converted U.S. civil litigation into a high-yield alternative asset class, with the American energy sector now squarely in the sights of foreign adversaries. Under this model, outside investors supply capital to plaintiffs or their lawyers in exchange for a percentage of any settlement or judgment. The result is a multibillion-dollar industry.

“The structure rests on a clear tax loophole. By packaging deals as prepaid forward contracts, funders can report their returns as long-term capital gains rather than ordinary income. Foreign nationals and foreign corporations with no U.S. presence pay no U.S. withholding tax on these gains and are not treated as earning effectively connected income. Consequently, offshore investors can extract tax-free profits from American court outcomes, creating opportunities for foreign malign influence.

“Nowhere are the risks more acute than in the energy sector. High-stakes battles over climate claims, intellectual property in emerging technologies, mergers, joint ventures, and environmental regulations have surged in recent years. Courts, defendants, and the public seldom discover who is actually financing the lawsuits or shaping their strategy. Compounding the problem, foreign sovereign wealth funds and entities tied to geopolitical rivals have poured substantial capital into U.S. energy-related litigation, creating significant national-security vulnerabilities.

“Congress has an opportunity to close this loophole now and ensure that foreign entities that profit from litigation speculation can no longer exploit our tax system. Doing so protects American taxpayers and puts the interests of our citizens first.”

AEA Experts Available For Interview On This Topic:

• Tom J. Pyle, President
• Kenny Stein, Vice President of Policy
• Alex Stevens, Manager of Policy and Communications

Additional Background Resources From AEA:

• Coalition Letter
• Policy Brief: Third-Party Litigation Funding
• Foreign Billionaires Are Investing in American Energy Lawsuits

For media inquiries please contact:
THOMAS.PYLE@ENERGYDC.ORG