The U.S. Department of Justice has released a series notable advisory opinions outlining how some typical activities of law firms, consultants, and corporate legal departments may require registration under the Foreign Agents Registration Act (FARA). Some of the more interesting opinions are summarized here:
- A foreign state-owned bank hired a U.S. law firm to provide legal advice.
- A separate consulting firm would provide the following services
to the U.S. law firm in its rendering of services to the foreign
- Assessment of foreign state bank's cybersecurity programs and policies;
- Limited outreach to U.S. banks, financial institutions, and federal regulatory agencies including Federal Reserve Board and Comptroller of the Currency regarding strategic advice but no advocacy;
- Direct outreach to U.S. financial institutions and federal agencies to familiarize them with foreign state banks programs but no efforts to influence U.S. government policy.
- Despite the consulting firm's statement that its services
would be nonpolitical and done without intent to influence U.S.
foreign policy, the DOJ concluded as follows:
- The consulting firm's appearances before the Federal Reserve Board and Comptroller constituted activities covered by FARA;
- The "private and nonpolitical activities" exemption was not applicable.
- The consulting firm was required to register with FARA Unit.
2. Re: Legal Exemption (2019)
- A U.S. organization's legal department was retained by a foreign government to act as counsel in a civil litigation.
- The legal department's activities would directly support the litigation and the U.S. organization took the position that its activities fell within FARA's legal exemption.
- The DOJ agreed that the legal department's in-court representation of the foreign government fell within the legal exemption.
- The DOJ concluded that public relations activities the legal department planned to undertake in connection with litigation (e.g., provide factual responses to media inquiries, issue press releases, engage in press conferences) did not fall within the legal exemption.
3. Re: Sovereign Wealth Fund (2019)
- A U.S. strategic consulting firm was to be engaged by a foreign corporation with commercial investments in U.S. companies.
- The proposed engagement would involve the U.S. firm advising the foreign corporation on investment strategies.
- Engagement might have involved U.S. firm contacting U.S. officials to gather information about the position of U.S. government on potential cross-border investments or transactions.
- The foreign corporation was incorporated to manage assets held by the foreign government, which may use the foreign corporation's funds and spend up to 50% of foreign corporation's expected long term returns.
- The DOJ concluded as follows:
- In representing the interests of the foreign corporation before a U.S. agency or official, the U.S. firm would be representing the interests of the foreign government because the interests of the foreign corporation and foreign government are inextricably linked;
- The proposed actions did not fall within the "private and nonpolitical activities" exemption, because the actions were not truly private due to the inextricably linked interests of the foreign corporation and the foreign government;
- The engagement of the U.S. consulting firm would improve the standing of foreign corporation in eyes of U.S. officials. The benefit to foreign corporation (and by extension foreign government) was evinced by the foreign corporation's engagement of firm to conduct this outreach.
- Consulting firm was required to register.
Narrow Construction of "Private and Nonpolitical Activities" Exemption. The DOJ's conclusion in the Sovereign Wealth Fund opinion states that actions in furtherance of a foreign corporation's commercial interests require registration in cases where those activities are "inextricably linked" with the interests of the foreign government. The Banking Sustainability opinion comes to a similar conclusion. Clearly, in DOJ's opinion, activities on behalf of a foreign corporation that are not explicitly affiliated with a foreign government may nonetheless require registration under FARA. These DOJ opinions suggest that U.S. firms representing foreign commercial entities should take the step of considering whether there are any connections between the interests of the foreign corporation and the interests of the foreign government.
Narrow Construction of "Legal Exemption". Likewise, the opinion concerning the "Legal Exemption" continues this trend, stating that public relations activities (for example, responding to media inquiries, issuing press releases, and engaging in press conferences) on behalf of a foreign government, even when done in the context of legal representation, do not fall within the FARA legal exemption.
It is Critical to Assess and Mitigate FARA Risk. The aggressive positions taken by the DOJ FARA unit in these particular opinions may ultimately be unsustainable because of their breadth. Additionally, we note the conclusions contained in published DOJ opinions are limited to the facts of each individual case. We recommend obtaining professional assistance to mitigate risks created by these advisory opinions. You may wish to consider establishing FARA compliance policy and procedures to distinguish these conclusions. Depending on the facts, seeking your own DOJ advisory opinion may also be warranted. In any event, DOJ's aggressive reasoning may require attention to FARA in professional services settings than ever before. The Sheppard Mullin FARA legal team will continue to monitor and analyze developments in this area.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.