In the wake of a global law firm entering into a multimillion-dollar settlement for failing to register as an agent of a foreign principal under the Foreign Agents Registration Act (FARA or the act), other law firms have recently come under scrutiny for their FARA (non)compliance. It has become increasingly clear that many services provided by law firms to non-U.S. clients require registration under the act.
While many law firms have relied on the “legal exemption” from FARA registration, the U.S. Department of Justice (DOJ) has highlighted this exemption’s limited scope in several recent advisory opinions, and we have seen a corresponding uptick in law firm registrations. Lawyers who work for foreign clients outside of formal court or agency proceedings should understand and review closely their potential FARA obligations.
Background
FARA requires agents of foreign principals to register with DOJ within 10 days of becoming an agent and before engaging in any registrable activity. Registered agents must file periodic reports and copies of informational materials with DOJ. Generally, individuals or entities may qualify as foreign agents if they engage in “political activities,” act as a public relations counsel or political consultant, or raise funds within the United States on behalf of a foreign government, foreign political party, or person, company, or organization outside of the United States. The term “political activities” is broadly defined to include any activity intended to influence the U.S. government, U.S. media, or any other sector of the U.S. public with respect to U.S. policy or the political or public interests of a foreign government or foreign political party. To trigger FARA registration, one need not make any lobbying contacts, nor must one even be paid: FARA can cover “back-end” advice and has no financial trigger for registration.
FARA Legal Exemption
There are multiple exemptions from FARA registration. As mentioned above, law firms commonly rely on the exemption for providing legal services to a foreign principal. The act waives registration and reporting for licensed lawyers who represent a foreign principal before any court of law or U.S. government agency. This exemption is limited to activity conducted “in the course of legal proceedings, criminal or civil law enforcement inquiries, investigations, or proceedings, or any agency proceedings required by statute or regulation to be conducted on the record.” The legal exemption does not extend to attempts to influence government officials (or any segment of the U.S. public) outside of these formal proceedings, if the influencing activity is related to U.S. policy or the public or political interests of a foreign government or foreign political party.
Significantly, this means the legal exemption does not apply when lawyers engage in informal agency interactions that are not required—by statute or regulation—to be conducted on the record. Recent DOJ advisory opinions have emphasized this fact. In one case, DOJ found that the legal exemption did not apply when a law firm sought to bolster its client’s chances of obtaining transaction approval from the Committee on Foreign Investment in the United States (CFIUS) by contacting members of Congress. Because the contacts constituted “political activity” and fell outside the scope of any formal agency proceeding, the legal exemption did not apply.
If a law firm interacts with a U.S. government agency on behalf of a client and the agency has not formally opened a proceeding or investigation, the legal exemption might still be available, but only if the interactions with the agency are required to be conducted on the record. Additionally, the legal exemption can apply when a law firm interacts with a U.S. government agency outside of an on-the-record proceeding but does not engage in “political activity.” For example, DOJ determined the legal exemption applied where a law firm interacted with the Office of Foreign Assets Control (OFAC) about the potential sanctions designation of its foreign clients. In that case, the law firm limited its planned activities to: (1) representing the clients in any investigation or enforcement proceedings before DOJ and requesting that OFAC stay any sanctions designation of the clients and afford the clients an opportunity to respond to allegations. Here, the legal exemption applied because the law firm sought to represent the foreign clients in formal proceedings, and its interactions outside of those formal proceedings intended only to influence the specific application of OFAC’s policy to the foreign clients and did not attempt to influence broader agency policy. In other words, the law firm did not engage in political activity in its informal interactions with OFAC, so the legal exemption applied.
DOJ’s narrow interpretation of the legal exemption means also that the exemption does not extend to any public relations activities conducted adjacent to the formal representation of a client in court or agency proceedings. In a late 2019 advisory opinion, DOJ told an organization that the legal exemption would apply to its “in-court representation” of its foreign government client, but not to its public relations activities relating to the legal representation—including providing factual responses to media inquiries about the litigation, issuing press releases containing facts regarding the litigation, and holding press conferences about the representation of the client. The legal exemption did not apply to these latter activities because they did not occur “before any court of law or agency of the Government of the United States.”
Additional FARA Exemptions
Other FARA registration exemptions may still be available even when the legal exemption is not. Law firms will often be able to rely on one of the “commercial activity” exemptions when working for their foreign corporate clients. However, these exemptions do not apply if the firm’s work directly promotes the public or political interests of a foreign government or foreign political party. Thus, work for foreign state-owned enterprises and sovereign wealth funds may trigger FARA registration, even when the work is intended to promote their bona fide trade or commercial interests.
In another case involving CFIUS, DOJ required a U.S. firm to register under FARA when representing a foreign investment company that operated like a sovereign wealth fund. The U.S. firm proposed to contact government officials to collect information about the U.S. government’s position on cross-border transactions and how CFIUS would view certain transactions. The firm said that this activity would not involve any advocacy for policy positions; it would merely be information-gathering. Still, DOJ found that neither the commercial exemptions nor any other FARA exemptions applied to this work, because the firm’s activities would directly promote the foreign government’s public interests. Specifically, the firm’s interactions with government officials would aid the client’s decision-making and improve its standing in the eyes of the government officials. The lesson here is that even informal meetings with agency officials can trigger registration, depending on the client’s identity and ownership structure.
Law firms also may be able to rely on the so-called “LDA exemption,” which allows agents to register and file under the Lobbying Disclosure Act of 1995 instead of FARA. However, this exemption applies only if the firm engages in federal lobbying activities, and only if the principal beneficiary of the work is not a foreign government or foreign political party.
Takeaways
Law firms should carefully assess their potential FARA registration obligations when representing foreign clients. It is not safe to assume that the legal exemption applies simply because the law firm is providing legal services to the client in the ordinary course of business. FARA’s legal exemption is narrower than that, and DOJ is escalating investigations into firms that even unwittingly cross the line.
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