FARA Reform Legislative Activity Heats Up

FARA Reform Legislative Activity Heats Up

December 21, 2022, Covington Alert

There is near universal agreement among policymakers, lawyers, and lobbyists that the Foreign Agents Registration Act (“FARA”) is deeply in need of legislative reforms to update the statute and bring it in line with modern practices. Agreeing on specific amendments, however, has been challenging, and several prior efforts ended with no new enactments, as we have chronicled. In recent weeks, there has been an increase in legislative activity, and one provision nearly became law. These recent actions are summarized in this alert.

The Senate Passed Bills to Reform the LDA Exemption to FARA

The Senate recently passed a pair of bills sponsored by Senators Chuck Grassley (R-IA) and Gary Peters (D-MI) to reform FARA. Both bills would make changes to the Lobbying Disclosure Act (“LDA”) registration exemption to FARA and certain LDA registration requirements. Under FARA’s LDA exemption, activities by agents of a foreign individual or a foreign nongovernmental entity that register under the LDA are exempt so long as the agent has engaged in at least some lobbying activities and a foreign government or foreign political party is not “the principal beneficiary” of the activities. Registering under the LDA is an attractive option to many companies because it is far less burdensome than FARA and less subject to public stigma.

Both bills would subject certain LDA registrants to greater scrutiny and would provide the FARA Unit of the Department of Justice (“DOJ”) with enhanced monitoring and enforcement tools. These developments would have significant implications for U.S. companies with foreign parents or foreign affiliates that currently rely on the LDA registration exemption to satisfy their FARA obligation.

The Senate passed the “Lobbying Disclosure Improvement Act” (S. 4893) last week by unanimous consent. Under this bill, LDA registrants must identify on their registration "whether the registrant is exempt under" FARA's LDA exemption. This is an administrative change that would require certain LDA registrants to check a box on their filings. Congress appears to have intended to make it easier for the public to identify LDA registrants engaged in FARA registrable activities, which could also make it easier for the FARA Unit of the Department of Justice to flag and scrutinize the activities of such LDA registrants. The wording of the bill is somewhat ambiguous with respect to how this change affects current LDA registrants. Because most changes to the information on an LDA filer's registration are made on the filer's quarterly activity reports, it is relatively rare to file an amended LDA registration report. The bill does not address how current registrants should handle the new requirement if they are likely never to be in a position to file another registration report. The bill also does not address filers who initially file under the LDA because they have crossed LDA registration thresholds, but later engage in FARA registrable activities and take advantage of the LDA exemption based on their existing LDA registration. This change, if enacted, would present new challenges for the regulated community. The amendment assumes that it is always clear when a filer has a FARA registration obligation and is relying on the LDA exemption, but that is not always the case. This amendment would force LDA registrants to take a position on whether or not they believe they are engaged in FARA registrable activities.

The Senate passed the second bill, “Disclosing Foreign Influence in Lobbying Act” (S. 4254), earlier this fall. The bill would amend the LDA registration requirements to require that LDA filers “identify any connection with a foreign government or political party that plans, supervises, directs, or controls any effort of that lobbyist, regardless of those entities' financial contributions to the lobbying effort.” Currently, LDA registrants are required to identify certain foreign entities associated with the registrant or its lobbying activities. This change would expand that requirement to focus specifically on the involvement of foreign governments in a registrant’s lobbying activities. Responding in the affirmative to the new disclosure requirement could amount to an admission that the LDA exemption would not apply and that LDA registration would not be sufficient on its own, presumably steering registrants to file under FARA. In a press statement, Senator Grassley stated the rationale for the change, explaining “[w]e’ve learned that the Chinese Communist Party has used other organizations as proxies to secretly push their agenda in the United States. This bill builds on existing lobbying and foreign agent laws to shine a light on that behavior so we know exactly where influence campaigns are coming from to ensure policy decisions are in the best interest of the American people.”

Both the “Lobbying Disclosure Improvement Act” and “Disclosing Foreign Influence in Lobbying Act” now await House action.

Elimination of Commercial and LDA Exemption for Certain Countries Nearly Became Law

In considering the National Defense Authorization Act (“NDAA”) for 2023, the Senate manager’s amendment accepted an amendment offered by Senators Cornyn, Whitehouse, Hagerty, and Fischer to revise the statutory commercial exemption and the LDA exemption. The provision, if enacted, would have precluded the use of either exemption for an agent of a foreign principal that is a “country of concern.” The provision defined a “country of concern” as China, Russia, Iran, North Korea, Cuba, and Syria. The Joint Explanatory Statement to accompany the conference report on the bill, which was released on December 6, 2022, indicated that the provision was dropped in the conference report.

Department of Justice Voiced Support for Legislative Reforms

As noted in our separate client alert, the Department of Justice recently endorsed legislative reform of FARA, including the complete elimination of the LDA exemption. DOJ also announced its intention to develop its own draft legislation.

All of these developments suggest that after years of discussion, but little action, Congress may be on the verge of incremental changes, at least, to FARA.

If you have any questions concerning the material discussed in this client alert, please contact members of our Election and Political Law practice.