The Foreign Agents Registration Act

(FARA): A Guide for the Perplexed

 

 

July 26, 2019

Election and Political Law, White Collar Defense and Investigations

 

In 1938, Congress enacted the Foreign Agents Registration Act (FARA), requiring foreign

agents to register with the Attorney General. As amended over the years, it applies broadly to anyone who acts on behalf of a foreign principal to, among other things, influence U.S. policy or public opinion. Until recently, it was a backwater of American lawand a very still backwater at that, with just seven prosecutions between 1966 and 2016.

 

That is changing now. Like the once obscure Foreign Corrupt Practices Act, which prosecutors revived from hibernation more than a decade ago, FARA is receiving its close-up. In the last three years, prosecutors have brought more FARA prosecutions than they had pursued in the preceding half century. In-house lawyers are scrambling to bone up on this famously vague

criminal statute, at a time when the nations tiny bar of experienced FARA lawyers can still hold its meetings in the back of a mini-van.

 

While recent cases related to Special Counsel Robert Muellers investigation are the most

salient examples, the renewed focus on foreign agents actually began a few years ago, and not all of the recent prosecutions are connected to the Mueller investigation. A significant uptick in audits of registered foreign agents by the FARA Unit (the Department of Justice office that administers FARA), followed by significant staffing changes in the FARA Unit, and then

noticeably more aggressive interpretations of the statute in advisory opinions and informal

advice from the FARA Unit, all signaled a sea change.

 

In September 2016, DOJs Inspector General issued a report suggesting that the Departments enforcement of FARA was too lax, pointedly noting the rarity of prosecutions, and recounting FBI field agents complaints that it was too hard to secure DOJ approval to file FARA charges.

The IGs report recommended that DOJs National Security Division adopt a comprehensive

FARA enforcement strategy. It is likely that the IGs lengthy review encouraged line FARA

attorneys at DOJ to toughen their posture, even before the IGs critical report was issued. The report has, in turn, created a feedback loop, emboldening government officials to be more

aggressive in response to the IGs criticism. Recent events have further incentivized them to

take a harder line.

 

Below we provide a detailed primer on FARA registration, highlighting the ways in which it is

now relevant to a broad cast of characters, including multinational corporations. But first, here

are some of the key points to keep in mind:

 

 

 

 

FARA is written so broadly that, if read literally, it could potentially require registration

even for some routine business activities of law firms, lobbying and public relations firms,

consulting firms, nonprofit advocacy groups, charitable organizations, ethnic affinity

organizations, regional trade promotion groups, think tanks, universities, media

organizations, trade associations, U.S. subsidiaries of foreign companies, and other

commercial enterprises;

There does not need to be a foreign government client;

There does not need to be a written contract;

There does not need to be any payment of a fee;

A mere request from a foreign person or entity (such as a foreign government official

or, in some circumstances, even a foreign private sector individual or company) for help

setting up meetings with U.S. government officials could trigger registration;

A request from a foreign person or entity to provide advice regarding how best to

influence U.S. policy or U.S. public opinion could trigger registration; and

There are exceedingly few cases clarifying FARAs broadly worded provisions. And,

while the DOJ FARA Unit commendably published a subset of its long-secret advisory

opinions last year, these short opinions are light on legal analysis and difficult to apply to

other situations. This leaves prosecutors ample room to bring novel test cases, and

parties who are new to the statute ample room to misjudge its boundaries.

 

FARA in a Nutshell

 

FARA is a complicated, arcane, and loosely worded statute. Whether registration is triggered is highly fact dependent, turning on whether agency exists, the nature of the activities conducted by the agent, and whether any of FARAs amorphous exemptions apply.

 

The statute requires agents of foreign principals to register with the DOJ and file both detailed disclosure reports and copies of any informational materials that are distributed within the

United States. Such materials must bear a stigmatizing disclaimer reflecting that they were

prepared by a foreign agent. When FARA registration is required, both individuals acting as

agents and their employer must register.

 

While foreign governments and political parties are well understood to be foreign principals,

the term also includes any non-U.S. individual, partnership, association, corporation, or

organization. A foreign parent company of a U.S. subsidiary would be a foreign principal, for

example.

 

Broad Triggers

To become a foreign agent, an individual or entity must engagewithin the United Statesin certain FARA-triggering activities as an agent of, or in any other capacity at the order, request, or under the direction or control of, a foreign principal. Although there is some law clarifying what would constitute acting under the direction or control of a foreign principal, the term

request is very broad and seems to go well beyond traditional principles of agency law. The

one court decision that briefly touches on a request that is sufficient to trigger FARA

registration does little to offer a practical answer. DOJs formal response to the 2016 Inspector Generals report provided little additional guidance, although the Department took the position  

 

that it looks for evidence of tasking by the foreign principal to the agent. A recent advisory

opinion seemed to interpret the term agent of a foreign principal broadly enough to include

working on behalf of a U.S. subsidiary of a foreign company, even when the foreign parent is

not involved in the work.

 

Having a written contract or receiving a payment for services rendered, while not required for

FARA registration, are strong evidence of agency, suggesting that the activities are undertaken for the foreign principal. But even without a contract or payment, there may be other indicia of agency, especially in light of the breadth of the term request.

 

Assuming that an individual or entity is acting as an agent of a foreign principal, the obligation to register under FARA is triggered when the agent conducts, on behalf of the foreign principal, one or more of the following activities within the United States:

 

1. Engaging in political activities, a term that encompasses any activity that is intended to, or even believed to, influence the U.S. government or any section of the U.S. public

regarding: (1) formulating, adopting, or changing the foreign or domestic policies of the United States or (2) the political or public interests, policies, or relations of a

government of a foreign country or a foreign political party;

2. Acting as a public-relations counsel, publicity agent, information-service employee,

or political consultant;

3. Collecting or dispensing money; and/or

4. Representing the interests of the foreign principal before an agency or official of the

United States Government, generally by making direct contact with government officials. These triggers for registration are, on their face, extremely broad. And some courts have

interpreted them literally. This year, for example, a federal district court in Florida held that a

company that agreed to broadcast a government-owned news agencys radio programs was

required to register under FARA because it was acting as a publicity agent. FARA practitioners nonetheless often assume that some of the triggers cannot mean what they say (e.g., collecting or dispensing any funds of behalf of any foreign principal?). And DOJ itselfin privately issued advisory opinions, some of which are still unpublishedhas often placed a gloss on the FARA registration triggers, reading into them narrowing language that does not appear in the statute.

Because such interpretations by the Department are not published or exist merely as lore, the Department can, and recently has, rather abruptly altered its views.

 

Based on FARAs legislative history, DOJ has in the past sometimes read the definition of

political activities into other triggers; for example concluding that one could not be acting as a political consultant for FARA purposes unless one was also engaging in political activities, as defined in the statute. Indeed, there is some legislative history to support this position,

notwithstanding the statutes plain language. In a 1989 letter to Congress concerning Henry

Kissingers activities for foreign clients, DOJ advised Congress that Kissinger was not required to register because the Department has consistently interpreted the term political

consultantto mean any person who takes steps beyond merely advising the foreign principal, such as arranging meetings with U.S. Government officials on its behalf or accompanying the principal to such meetings. In recent interactions with the FARA Unit, however, staff have

called into question the validity of such prior guidance, notwithstanding the legislative history.

Whats more, several recently published advisory opinions appear to interpret the "political

activities" trigger and the "political consultant" trigger somewhat interchangeably. In one opinion,

 

 

the FARA Unit emphasized that it viewed the requesting individual as a political consult[ant]

under FARA because he is engaged in political activities that reached the United States.

 

FARA has no de minimis threshold. It can be triggered by even the slightest activity that meets any one of the statutory triggers. A single meeting, for example, with a U.S. official by an

executive of a company headquartered outside the United States, or by its U.S. subsidiary on

behalf of the foreign parent, might satisfy the representation trigger. And the mere act of

hosting a conference, distributing a policy report, requesting a meeting, or reaching out to

opinion leaders on behalf of a foreign principal could satisfy the political activities trigger.

 

Practitioners have placed great weight on the statutory language specifying that FARA only

applies to activities within the United States. Here too the FARA Unit recently has seemed

inclined to take an extremely broad view of what constitutes activity within the United States, suggesting that even a very limited nexus to the United States is enough to trigger the statutes jurisdiction over related activities outside the United States. Indeed, in one recent advisory opinion, the FARA Unit stated that it did not concur with the assertion registration for FARA- triggering activities would not be required if those engaging in the activities were physically outside the United States at the time of performance or delivery of the service.

 

Vague Exemptions

By this point, one might wonder why there are not tens of thousands of FARA registrants

(currently there are only about four hundred). Apart from non-compliance, which is common, the main explanation is that even when the registration triggers are satisfied, there are several

statutory and regulatory exemptions that can be relied upon to exempt a person from

registration. Unfortunately, the most widely used exemptions are not well defined, DOJs

publicly available regulations and advisory opinions interpreting them are sparse, and there is

essentially zero case law regarding the scope of the exemptions. The most commonly invoked exemptions are summarized below.

 

The Commercial Exemption

Probably the most frequently used exemption to FARAs registration requirement is the so-

called commercial exemption, which exempts private and nonpolitical activities in furtherance of  the bona fide trade or commerce of a foreign principal. Implementing regulations indicate that trade and commerce includes the purchase and sale of commodities, services, or property.

In 2003 regulations, the Department added a second, regulatory commercial exemption for

political activities undertaken for a foreign corporation in furtherance of the bona fide

commercial, industrial, or financial operations of the foreign corporation. There remains,

however, considerable uncertainty regarding the outer boundaries of the commercial exemption.

 

Critically, it does not apply when the activities are directed by, or directly promote the public or political interests of, a foreign government or political party. There is little published guidance regarding what would constitute directly promot[ing] the public or political interests of a foreign government. Over the last couple of years, the FARA Unit has appeared to take a more

expansive view of this language, treating contacts in the United States about matters that are

also important to a foreign government as potentially falling outside the commercial exemption, even where a foreign corporation has a legitimate commercial interest in the same issue. For example, in a recent advisory opinion, the FARA Unit determined that activities aimed at

improving a foreign state banks suitability for building commercial relationships with U.S.

financial institutions directly promotes the interests of a foreign country. On the other hand, in

 

 

another opinion, the FARA Unit seemed to interpret the commercial exemptions directly

promote language narrowly, placing an emphasis on whether there was direct involvement by the foreign government. It therefore is important to analyze the extent to which a foreign

governments public interests would be promoted by political activities in the United States even if the impetus for the activities is the commercial objectives of a private sector foreign principal.

 

DOJ regulations also expressly provide that the commercial exemption is available even to

state-owned enterprises that are wholly owned by a foreign government. This is significant given the huge number of state-owned enterprises around the world, many of which have business operations in the United States pursuing commercial objectives that are often separate and distinct from the foreign policy objectives of their governmental owners. In recent years, the FARA Unit has seemed uncomfortable with the fact that its regulations expressly allow state- owned enterprises to avail themselves of the commercial exemption, but the regulation is clear and remains in force, in recognition of the fact that many state-owned enterprises operate with significant commercial independence.

 

The LDA Exemption

When Congress strengthened federal lobbying disclosure requirements in the mid-1990s

through the Lobbying Disclosure Act (LDA), it simultaneously added a new exemption to FARA that permits an agent of a foreign private sector principal to satisfy any FARA obligation by registering under the LDA, so long as the agent has engaged in at least some lobbying

activities. Many entities that would otherwise be foreign agents choose to satisfy FARA, where applicable, by registering and reporting under the LDA, which is generally considered far less burdensome.

 

The LDA exemption is not available to an agent of a foreign government or political party,

however. Moreover, even if the agent is engaged by a private entity, DOJ regulations provide

that the exemption is not available if the principal beneficiary of the work is a foreign

government or political party. There is no definition of principal beneficiary, and in the recent

past the FARA Unit has taken an increasingly broad view of what would make a foreign

government the principal beneficiary of actions undertaken by an agent on behalf of a private

sector foreign principal. A footnote in a recent advisory opinion, for example, takes the position that there are situations in which a foreign government or political party may not be the

principal beneficiary, but a principal beneficiary of lobbying activities in which the LDA

exemption would not apply. This could have significant implications for U.S subsidiaries of

foreign parent corporations. For example, a U.S. subsidiary registered under the LDA may think  it has addressed any FARA exposure associated with its foreign parent, but if the subsidiary acts on behalf of its parent with respect to an issue that is of significant interest to a foreign government, there is a risk that the FARA Unit could determine that the LDA exemption does not apply.

 

As noted, an agent who seeks to take advantage of the LDA exemption also has to engage in at least some lobbying activities on behalf of its foreign principal. This means, for example, that if the agent is engaged solely to provide public relations advice, political consulting services, or fundraising within the United States, it could not avail itself of the LDA exemption and would have to register under FARA.

 

Consistent with the trend of strengthening FARA, several Members of Congress have

introduced legislation to eliminate the LDA exemption from FARA or to conduct an audit  

addressing how the exemption is used. Indeed, in the IG report, FARA Unit staff expressly

urged that Congress eliminate the LDA exemption to once again require those who lobby for

foreign commercial interests to register under FARA.

 

The Lawyers Exemption

FARA also includes a narrow exemption for lawyers engaged in the practice of law on behalf of a foreign client. But in recent years the lawyers exemption has been narrowed considerably. It does not apply to a lawyers attempt to influence agency personnel with respect to U.S.

government policy matters, or the public interests of a foreign government, except in the course of judicial proceedings; criminal or civil law enforcement inquiries, investigations, or

proceedings; and agency proceedings required by statute or regulation to be conducted on the record. For example, the FARA Unit concluded in a recent advisory opinion that a U.S. law firm had an obligation to register under FARA for representing a foreign company in the acquisition of a U.S. company, reasoning that the representation involved educating U.S. policymakers about the foreign companys proposed acquisition of a U.S. company. The intent behind this exemption appears to be to require registration by law firms when they act more as lobbyists, public relations advisors, or political consultants than as legal counselors. But this is a very fine line, requiring careful parsing of the language of the lawyers exemption.

 

The Academic Exemption

Universities, think tanks, and other scholarly institutions often look to FARAs academic

exemption to avoid registration. This exemption applies to persons solely engaged in bona

fide religious, scholastic, academic, or scientific pursuits or the fine arts. DOJ regulations

provide, however, that it does not apply if the person is engaged in political activities. There is little available guidance concerning the scope of the academic exemption.

 

Interestingly, the 2016 IG report noted that the FARA Unit specifically identified think tanks,

organizations operating on college or university campuses, and non-governmental and grass

roots organizations as entities that often claim to be exempt from registration, for which DOJ

lacks sufficient investigative tools. In addition to asserting that they are not acting as agents

under foreign direction or control, some of these entities look to the academic exemption as a defense.

 

Practical Implications

Given FARAs breadth and ambiguity, and DOJs recent shift to interpreting the exemptions very narrowly, lawyers and compliance personnel should be attuned to the following common traps:

  Requests received by a U.S. company from a foreign business partner or a foreign

affiliate to arrange meetings with U.S. officials. Helping a foreign entity or individual

engage directly with the U.S. government, such as by setting up a meeting, is perceived

by the Department of Justice as core FARA activity. The statute can be triggered even

without a contract or payment, and even if the foreign person is not a government

official. Companies may think that they are simply doing a favor for a foreign business

partner, when they in fact have waded deeply into FARA territory. To the extent the

contact is unrelated to the companys own activities, the commercial exemption will not

apply. And even if the company is already LDA registered, it is certainly not registered

for the foreign business partner, so the LDA exemption also will not apply.

 

Private sector lobbying on an issue that is deeply connected to a foreign

governments interests. Global companies often face commercial issues that are

intertwined with governmental issues. For example, companies often have legitimate

business reasons to lobby for or against sanctions on particular countries, or to

encourage the United States to adopt specific trade policies directed at particular

countries. It may seem natural to coordinate that lobbying with the government of the

affected state, but working too closely with a foreign government or its agents can create

FARA risks. What if the foreign government requests that you target your activities in a

particular way? Even if your company has a scrupulous LDA compliance program, the

LDA exemption may not be available if the activities principally benefit the foreign

government, despite your own parallel commercial interest.

Requests from a foreign embassy, or from other foreign government officials, to

arrange meetings or to provide strategic advice regarding a policy matter before

the U.S. government. Depending on the particulars, including whether the advice is

rendered within the United States, it is possible that advising on influencing U.S. policy

or public opinion could trigger registration. Arranging meetings also likely would trigger

registration.

Business development activities involving foreign clients. It is not unusual for law

firms, public relations firms, consulting firms, and government contractors that do

business around the world to be asked by foreign clients for favors, such as making an

introduction to officials or thought leaders in the United States, providing advice on a

dispute with the U.S. government, or helping with media relations or other staff support

for a clients visits in the United States. While these may seem like routine client

relations activities meant to strengthen relationships, they could trigger FARA

registration, depending on the circumstances.

 

Although most major corporations have elaborate compliance manuals and training efforts,

FARA is often a blind spot that is absent from corporate compliance programs. In light of recent enforcement trends, most companies that have international business operations, or otherwise deal with foreign governments and firms, should include FARA in their compliance programs. Those companies that do have FARA policies often integrate them with their global anti-

corruption and government affairs policies.

 

Covington has one of the nations most experienced and long-standing FARA practices, which includes attorneys in our Election and Political Law and White Collar Defense practice groups. The firm litigated and won a rare civil case limiting the scope of DOJs authority under FARA, in Attorney General of the United States v. Covington & Burling. The firm routinely advises U.S. and international clients on compliance with FARA, obtains advisory opinions from the FARA Unit, represents clients in FARA audits and internal investigations, and defends clients accused of violating FARA.

 

 

If you have any questions concerning the material discussed in this client alert, please contact the following members of our firm: