Foreign agent law faces sweeping changes

The Department of Justice is expected to propose sweeping updates to influence disclosure rules for agents of foreign clients next month that could reshape the contours of the World War II-era law.

It has been decades since there have been major legislative or regulatory updates to the Foreign Agents Registration Act (FARA), which imposed registration and reporting requirements for individuals and entities seeking to sway U.S. policy or the public on matters of foreign interests. 

Congress passed FARA in 1938 in response to the rise of Nazi propaganda in the U.S. The statute does not bar constitutionally protected free speech, but it seeks to create transparency into foreign influence operations. 

The law has not kept up with societal changes in recent years, including the rise of social media and multinational corporations, even as the Justice Department has gotten more aggressive in its FARA enforcement, practitioners say. 

“It has been a while and the law is showing its age,” Josh Rosenstein, a member of Sandler Reiff Lamb Rosenstein & Birkenstock who specializes in FARA compliance, told The Hill. 

“Some sort of regulatory change is going to come, the question is what those regulations look like, how sort of bold DOJ wants to be through the regulations and whether they want to push the envelope,” he added.

The Justice Department has signaled potential changes to key provisions, including the commercial and Lobbying Disclosure Act (LDA) exemptions as well as updated disclosure guidance for the digital era. But some experts question how that will uncover the truly disruptive influence operations seeking to shape modern political discourse. 

“The real issue is no one’s kind of stepping back and saying we’re using this statute that’s kind of ill-suited for modern society to try to apply it to modern society, and we’re not really targeting the things that are actually disruptive and causing a lot of the concerns and issues now, like foreign actors influencing elections and foreign actors fomenting unrest in the U.S.,” Kate Belinski, partner at Ballard Spahr, told The Hill.

The DOJ initially asked for comments on the “clarification and modernization” of FARA in December 2021, a few months after the departure of Brandon Van Grack, former head of the FARA unit. 

“Considering that the foundation of [FARA] is transparency, disclosure, awareness, the statute has all manner of references and expectations that aren’t aligned with the 21st century and social media,” Van Grack, now a partner at Morrison Foerster, told The Hill. 

The DOJ could release the long-anticipated notice of proposed rulemaking as soon as April, and practitioners told The Hill they hope new rules will the statute into the modern era and provide clarity on vague, sometimes conflicting guidance. 

“Having greater clarity with respect to the triggers as well as exemptions will help with enforcement,” Tessa Capeloto, a partner at the law firm Wiley, told The Hill. “When things become clearer, when the law is clearer and more well defined, then it becomes easier to comply.” 

The DOJ’s Office of Public Affairs did not return The Hill’s request to confirm the timing of and comment on the new rules. 

But practitioners said Justice Department officials teased several potential updates to FARA regulations at the annual National Forum on the Foreign Agents Registration Act in December.

In particular, comments on a potential overhaul to the longstanding “commercial exemption” caught the attention of FARA watchers. 

The commercial exemption currently excuses an agent of a foreign principal from registering under the FARA if their activities are “private and nonpolitical activities in furtherance of the bona fide trade or commerce.” 

But Jennifer Gellie, the former head of the FARA unit and current acting chief of the Counterintelligence and Export Control Section, floated updating the regulation during the FARA conference to consider whether an agent’s activities primarily benefit a foreign person or entity. 

Essentially, “DOJ wants to flip [the commercial exemption] on its head and say no, if you’re engaged in political activities on behalf of a foreign principal, even if it’s commercial in nature, you got to find another exemption,” Rosenstein said. 

The rule change could have a cascading effect for companies doing business with foreign governments or political groups. 

The Senate Homeland Security Permanent Select Subcommittee on Investigations has been embroiled in a months-long investigation into Saudi investments in the U.S. as a tool of influence. At a hearing before the committee last month, executives from four U.S.-based companies employed by the Saudi Arabian Public Investment Fund testified before the committee. Only one company, Teneo, is registered for that work under FARA. 

Sen. Richard Blumenthal (D-Conn.), who chairs the subcommittee, told The Hill after the hearing that one of the main findings emerging from the subcommittee’s investigation was the need to reform FARA, reforms he said he “definitely” plans to introduce. 

Perhaps the biggest change that could stem from the DOJ proposal would be the hollowing out of the LDA exemption, which excuses an agent that “has engaged in lobbying activities and has registered” under the LDA.

That means that while lobbyists would disclose the general work they did on behalf of their client and how much money they received, they are not required to disclose information materials or supplemental statements that include details like meetings with officials that are required if they registered under FARA. 

“Of all the potential changes, that’s one that would have among the more significant changes and ramifications,” Van Grack said, noting they significantly cut the number of FARA registrants after Congress passed the LDA in 1995. 

“If you just use the numbers from what happened in 1995, you’re potentially doubling or tripling the number of individuals entities that would potentially now need to register under FARA,” Van Grack added. 

The Justice Department expressed its support to repeal the exemption in a letter to Sens. Bob Menendez (D-N.J.), James E. Risch (R-Idaho), Dick Durbin (D-Ill.) and Chuck Grassley (R-Iowa) in November 2022. 

“The Division conducted the assessment and concluded that the LDA exemption should be removed from FARA. Accordingly, rather than supporting an audit on the efficacy of the LDA exemption, the Department would support its repeal,” Assistant Attorney General Carlos Felipe Uriarte wrote in the letter. 

Changes to both the commercial and LDA exemptions would likely face significant pushback from the business community. 

Belinski said she thought getting rid of the LDA exemption was “crazy.” 

“Yeah, it would increase the number of people who registered under FARA, but to what end? And then to a detrimental effects to investment and business climate in the U.S.,” Belinski said.

“Getting rid of the LD exemption is not going to do anything to expose like Russian interference in our elections,” she added.

Conference attendees also said DOJ officials signaled new guidance for labeling online “informational materials,” which refers to letters, emails, advertisements and other communications an agent disseminates to two or more people on behalf of their foreign client. 

These materials must include a prominent, lengthy statement disclaimer that they are coming from an agent of a foreign government. That’s challenging when the disclosure is about as long as the original 140-character limit of a tweet, Rosenstein remarked. 

“Public affairs and communications and lobbying have really adopted the use of modern technology really quickly,” Rosenstein said. “One of the main areas that the law has really failed to keep up is on very simple requirements, like the labeling and filing obligations with regard to what the law used to call propaganda and now calls informational materials.” 

Again, Belinski questioned how effective such guidance would be. 

“I think it’s great that they’re looking to modernize that but again, that’s assuming that you’re already capturing and the people that are disseminating this information are appropriately registered, which is just not the case,” she said.