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The third-party litigation finance industry must be getting rattled by calls for greater transparency. There's no other way to explain the strident op-ed recently offered by David Perla, managing director of Burford Capital, one of the industry's biggest players.

Perla says his goal is to clear up misconceptions about how much influence third-party funders have on the lawsuits they finance. He says “none,” but the real answer is “we really don't know.”

Without seeing the agreements between third-party funders and litigants, there's no way to reliably determine how much control funders exercise or how that influence might be used. The litigation finance industry has put up strenuous resistance to two different proposals that would shine a much-needed spotlight on it.

Both proposals would require the disclosure of third-party litigation funding agreements to the court and all parties of the litigation at the outset of a lawsuit. The first proposal sits before the federal court's Advisory Committee on Civil Rules; the other is the Litigation Funding Transparency Act and would require this disclosure in all federal class actions or multidistrict litigation overseen by a federal judge. The bill is pending before the Senate Judiciary Committee.

The U.S. Chamber Institute for Legal Reform supports such measures, which would mirror existing rules requiring defendants to disclose any insurance policies that may support their defense of the litigation. Just as with defendants' insurance, disclosing plaintiffs' litigation funding would help streamline the legal process by allowing both sides to make realistic appraisals of cases and know who has a financial interest in the outcome.

Burford says there is no comparison between insurance and litigation finance, but again, how are we to know? Insurers “control litigation-related decision making” by setting limits of coverage, Perla says, “something that providers of commercial litigation finance do not do.”

But virtually all litigation finance contracts remain secret, and the few that have leaked out suggest Perla is wrong. In one notorious incident, lawyers for Ecuadorian plaintiffs suing Chevron over environmental claims were forced to disclose their funding agreement with Burford. The agreement provided “control to the funders,” a.k.a Burford, including the power to install “nominated lawyers.” Since that contract became public, the litigation has been found by U.S. courts to be fraudulent and the chief plaintiffs' lawyer, Steven Donziger, has had his law license suspended.

In another case, a Florida appeals court ordered a third-party financer to pay the other side's legal bills after determining the funder had “veto power over whether the litigation was filed, who would file it” and “the final say over any settlement agreements.”

Assuming Burford no longer exercises any control over litigation (even though it offers no proof of that contention), no one really knows how the rest of the industry behaves. For example, Bentham IMF—a Burford competitor—published a U.S. “Code of Best Practices” that allows funders to “consult in good faith” over whether to accept a settlement offer and potentially to cut off funding if the client disagrees.

It's not unreasonable to assume that the hedge funds and others who finance commercial litigation treat these investments like any other and demand some measure of control over them. This could be exercised via explicit contractual agreements, like those described above, or through the frequent “monitoring” sessions between funders and litigants that Perla describes, or in the form of “guidance” as to whether they will continue paying the bills.

Indeed, if funders have absolutely no influence, what exactly are they discussing with investors? Are they really saying that they simply hand their investors' money over to lawyers and wait around for them to send back huge profits?

The main point is: We don't know, and we will remain in the dark until the law requires transparency. There is no reason to keep these agreements shielded from scrutiny.

Lisa A. Rickard is the president of the U.S. Chamber Institute for Legal Reform.