On December 20th, 2024, the Department of Justice (DOJ) published its long-awaited Notice of Proposed Rulemaking (NPRM) to update and clarify regulations issued under the Foreign Agents Registration Act (FARA). The DOJ's new regulations address several longstanding issues, including the scope of the commercial and legal exemptions, and disclosure of informational materials in light of technological advances, in an attempt to provide much-needed clarity and guidance on compliance with FARA. Comments on the NPRM are due 60 days after publication in the Federal Register.
Exemptions
FARA contains eight exemptions that allow a person engaging in otherwise covered activities for or in the interests of a foreign principal to be exempt from registration if certain criteria are met. The DOJ's NPRM addresses two of the most important and widely-used exemptions: (1) the so-called "commercial exemption" for bona fide trade and commerce, or activity that does not serve predominantly a foreign interest, and (2) the legal exemption for activity by attorneys in connection with certain proceedings, investigations, and inquiries.
The Commercial Exemption
FARA exempts any person who engages or agrees to engage only in either "(1) private and nonpolitical activities in furtherance of the bona fide trade or commerce of such foreign principal; or (2) in other activities not serving predominantly a foreign interest." 22 U.S.C. § 613(d). Current DOJ regulations interpret both of these subsections. See 28 C.F.R. § 5.304(b) (interpreting § 613(d)(1)); 28 C.F.R. § 5.304(c) (interpreting § 613(d)(2)).The NPRM proposes substantial revisions to the commercial exemption, and in particular to the § 613(d)(2) exemption for "activities not serving predominantly a foreign interest." In the NPRM, the DOJ concedes that the existing regulation "needs revision," and the proposed updates attempt to "better address[] the variegated relationships and conduct the [DOJ] sees in its investigations, and [] better guide[] practitioners on how the [DOJ] analyzes this exemption." Because the § 613(d)(2) exemption is one of the most widely relied upon, the proposed clarification of this provision, if implemented as currently drafted, could have significant consequences for a broad cross-section of potential FARA registrants.
First, the NPRM clarifies that the exemption applies to noncommercial interests, such as nonprofits, as well as commercial interests.
Second, the NPRM proposes creating a set of four exclusions to the exemption. Under the proposal, an agent would be categorically precluded from obtaining the exemption if:
- the intent or purpose of the activities is to benefit the political or public interests of the foreign government or foreign political party;
- a foreign government or foreign political party influences the activities;
- the principal beneficiary is a foreign government or political party; or
- the activities are undertaken on behalf of an entity that is directed or supervised by a foreign government or foreign political party (such as a state-owned enterprise) and promote the political or public interests of that foreign government or political party.
Notably, these are regulatory exclusions to a statutory exemption. If an individual is entitled to an exemption under 22 U.S.C. § 613(d)(2), that individual may argue that a reviewing court should disregard and accord no deference to the NPRM's purported limitation of that exemption. See Loper Bright Enters. v. Raimondo, 144 S. Ct. 2244 (2024). While the DOJ is entitled to issue regulations regarding its interpretation of statutory exemptions, its interpretation does not alter the effective scope of the exemptions. In light of the apparent disparity between the NPRM's four exclusions and the statutory text—which contains no such exclusions, much less the potentially broad exclusions in the NPRM—this aspect of the NPRM could be susceptible to litigation risk if it remains unchanged in the final rule.
Finally, in circumstances when none of these exclusions are triggered, DOJ is proposing to adopt a totality-of-the-circumstances test to determine whether the activities in question predominantly serve a foreign or domestic interest. To guide that test, DOJ is proposing a set of non-exhaustive factors. While in many instances several factors may prove significant, in other instances a single factor may be dispositive. These factors include:
- whether the public and relevant government officials already know about the relationship between the agent and the foreign principal;
- whether the commercial activities further the commercial interests of a foreign commercial entity more than those of a domestic commercial entity;
- the degree of influence (including through financing) that foreign sources have over domestic non-commercial entities, such as non-profits;
- whether the activities concern U.S. laws and policies applicable to domestic or foreign interests; and
- the extent to which any foreign principal influences the activities.
Individuals should expect the DOJ to apply this five-factor test if the NPRM becomes a final rule. However, as with the exclusions, we assess that this aspect of the rule could be open to a potential court challenge.
The NPRM also addresses the § 613(d)(1) exemption for "private and nonpolitical activities in furtherance of the bona fide trade or commerce of such foreign principal," particularly as it relates to recreational tourism. Under the NPRM, the § 613(d)(1) exemption would allow a person or employee of such person who engages or agrees to engage only in promoting bona fide recreational or business travel to a foreign country to come within this exemption where the agent's relationship to a foreign principal is apparent to the public. DOJ explains that "the promotion of recreational or business tourism is too attenuated from the definition of political activities to warrant imposing FARA registration obligations on agents who promote only recreational or business tourism in foreign countries." This marks a departure from past practice, as stated in several advisory opinions, as recreational tourism has traditionally been an area found by DOJ to be non-exempt.
The Legal Exemption
Under the current regulations, FARA provides for an exemption to registration for persons qualified to practice law who engage or agree to engage in legal representation of a disclosed foreign principal before a court or any agency proceedings, investigations, or inquiries. For decades, practitioners have expressed frustration with the regulation's lack of clarity regarding activities essential to the modern practice of law that occur outside of the courtroom and agency proceedings.
The DOJ has provided informal guidance that, once triggered by a qualifying proceeding, the exemption includes activities outside the proceeding that remain within the bounds of normal legal representation. The NPRM would solidify this prior guidance. The NPRM clarifies that the attorney of record in any of the covered proceedings can also provide certain information about the activities to others, such as the press, without falling outside the exemption. Under the proposed rule, to stay within the parameters of the exemption, the attorney's activities outside of the proceedings, investigation, or inquiry must not constitute "political activities" within the meaning of FARA. This means, for example, that the attorney could not qualify for the exemption while seeking to persuade persons who are not involved in the proceedings, investigation, or inquiry—such as Congress—to adopt or change foreign or domestic U.S. policy.
Other Exemptions
In its discussion of proposed changes, DOJ concluded that new regulations are not needed to address the Religious, Scholastic, or Scholarly Pursuits exemption. It also maintained its position that the LDA exemption does not apply in any situation where a foreign government or foreign political party is the principal beneficiary of the lobbying activity.
Informational Materials
To keep pace with technological advances, DOJ also proposes several changes to its regulations regarding "informational materials." Currently, FARA states that any agent who distributes "informational materials" to two or more persons must file copies of those materials with DOJ within 48 hours and that, regardless of the number of persons who receive the materials, those materials must contain a conspicuous statement that discloses that they are being distributed on behalf of the foreign principal.
In its new rules, DOJ proposes four key changes:
- DOJ proposes a definition for "informational materials" for the first time that would tie the definition of "informational materials" to the statutory definition of "political activities." Under the new definition, "informational materials" would be "any material that the person disseminating it believes or has reason to believe will, or which the person intends to in any way, influence any agency or official of the Government of the United States or any section of the public within the United States, with reference to formulating, adopting, or changing the domestic or foreign policies of the United States or with reference to the political or public interests, policies, or relations of a government of a foreign country or a foreign political party."
- DOJ proposes changes to reflect that DOJ has adopted a FARA eFile system that makes it easier to search for and download information about FARA registrants.
- Under § 5.401(b) of the proposed rule, the conspicuous statement must include the name of the country or territory where the foreign principal is located. The standard labeling requirement varies slightly depending on the medium through which the materials are disseminated.
- Any requests for information or advice, including scheduling requests, must contain a conspicuous statement about the agent's relationship with the foreign principal.
Other Proposed Changes
The DOJ's NPRM contains several other changes related to modernizing FARA. Among other changes, for example, the proposed regulations require all registration fees to be paid electronically through the FARA eFile system and eliminate typewritten or handwritten filings of registration statements and related documents.
The proposed regulations also address the advisory opinion process and provide that, when a request for an advisory opinion is not regarding an individual, the request must include a list of partners, officers or directors or persons performing the functions of an officer or director of the entity and all relevant and material information regarding their current or past affiliation with a foreign government or foreign political party.
The NPRM, notably, declines to adopt the common-law definition of agency or codify the DOJ's Scope of Agency guidance document as part of the regulations. It also does not narrow the definition of "political consultant" to those who conduct "political activities," which has been a key point of interpretive focus in the past. In its discussion of proposed changes, DOJ explained that if an agent is unsure about whether their activities are registrable, the agent should request an advisory opinion.
Although the issuance of these proposed regulations may provide helpful clarification in certain areas, they leave many questions unanswered. As has been the case historically, particularly in the past decade when FARA regulatory scrutiny and enforcement have increased substantially, it is likely that there will be significant debates and discussions about how to interpret and implement the potential new rules. Steptoe's FARA team is here to assist with navigating these proposed regulations, advise on drafting public comments, and answer any questions you may have about how these regulations could impact your business.
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