The U.S. Department of Justice (DOJ) recently provided fresh insights into upcoming regulatory changes to key Foreign Agents Registration Act (FARA) exemptions and discussed new areas of concern. These insights were shared at the American Conference Institute’s 5th National Forum on FARA on December 1, 2023, courtesy of three DOJ officials who are newly enshrined in leadership roles overseeing FARA: Deputy Assistant Attorney General (DAAG) Eun Young Choi, Acting Chief of the Counterintelligence and Export Control Section (CES) Jennifer Gellie, and Chief of the FARA Unit Evan Turgeon. With new regulations being released in 2024—representing the first significant changes in FARA’s regulations in nearly 30 years—their comments are a critical signal for the direction of FARA enforcement going forward.
The Commercial Exemption Will Be Rebranded and Narrowed
The most important announcement at the conference was that the new proposed regulations will seek to amend and narrow FARA’s commercial exemption. In December 2021, DOJ issued an Advanced Notice of Proposed Rulemaking (ANPRM) seeking the public’s input on potential updates and clarifications of FARA’s regulations. After two years of review, DOJ will soon publish a Notice of Proposed Rulemaking (NPRM) that will announce proposed changes to regulations and respond to the 29 comments received on the ANPRM. Publication of the final rule will occur after another public comment period.
The provisions commonly referred to as the “commercial exemption” in fact contain two distinct exemptions. The first—Section 613(d)(1)—covers persons engaged “in private and nonpolitical activities” acting “in furtherance of the bona fide trade or commerce” of a foreign principal.[1] At the conference, Acting CES Chief Gellie indicated that this exemption will remain unchanged.
The second exemption—Section 613(d)(2)—will be rebranded and narrowed under the new regulations. The statutory text of this exemption does not actually mention commerce, but rather applies to persons engaged in other activities, including political activities, “not serving predominantly a foreign interest.”[2] Based on the existing regulations, this exemption has been long thought to be available if the activities are not directed by, or do not directly promote the interests of, a foreign government or foreign political party.[3] In what appears to be a significant narrowing, the proposed new regulations will state that the exemption will only apply to activities that promote the interests of a U.S. entity. The exemption will apparently not apply if the activity furthers the interests of any non-U.S. entity, whether a foreign government, political party, corporation, or nonprofit. Acting CES Chief Gellie and FARA Unit Chief Turgeon also announced that the exemption will be rebranded as the “domestic interest exemption,” to clarify that U.S. non-commercial entities may benefit from the exemption.[4]
The DOJ officials noted that the NPRM will offer extensive details on the newly branded exemption, including targeted discussion of nonprofits. While we still don’t know the full contours of the proposed rules, we do know that the Section 613(d)(2) exemption will be narrowed—the only question is by how much.
New Areas of Focus
FARA Unit Chief Turgeon also identified two areas of concern for DOJ: sovereign wealth funds (SWFs) and foreign litigation funding (FLF).
Chief Turgeon explained that the Unit’s focus is on SWFs that serve as the alter egos of foreign governments and thus engage in activities that directly promote foreign governments’ interests. DOJ is actively looking at SWFs to determine whether they are engaged in registrable conduct; Chief Turgeon declined to identify a regional focus. The key question for DOJ is whether an SWF’s activities serve a true commercial purpose or if they merely advance policy-related interests. Such scrutiny is not entirely new, but it publicly affirms DOJ’s interest in SWFs and indicates its potential skepticism when evaluating their activities that have an effect on the United States.
Chief Turgeon also said that the FARA Unit is concerned by foreign entities that fund litigation in U.S. courts. He argued that litigation can be weaponized to tie up U.S. businesses and deplete their resources, providing foreign competitors with an advantage. He also raised concerns that foreign adversaries may fund litigation on divisive issues to try to inflame tensions and sow division among the U.S. public. Chief Turgeon stated that many FLF entities are likely engaged in registrable conduct not covered by the legal or commercial exemptions. In particular, he noted that covert funding and alignment with foreign government policies will be a focus of the FARA Unit going forward. As the litigation financing industry continues to grow, Chief Turgeon’s comments indicate a potentially expansive new front for FARA enforcement.
Bolstered Resources for FARA Enforcement
Chief Turgeon also discussed how the FARA Unit has acquired significant investigative and enforcement resources. The Unit now has six analysts and has hired a new attorney specializing in civil litigation. CES has also hired 19 new prosecutors and is in the process of hiring six more. The CES attorneys will work on FARA cases, supplementing the Unit’s dedicated FARA personnel. DOJ’s new corporate enforcement coordinators will also handle corporate FARA matters.
Overall, 2023 was another busy year for FARA, both for registrations–—there were over 500 active registrants for the third straight year—and high profile enforcement actions. Yet as we await the new proposed regulations to be released in the coming weeks, every indication from DOJ suggests that 2024 will be an even more active and disruptive year in the world of FARA.
[1] 22 U.S.C. § 613(d)(1).
[2] Id. at § 613(d)(2).
[3] See id.; 28 C.F.R. § 5.304(c).
[4] Currently, the regulations only address political activities on behalf of a “foreign corporation” in furtherance of a “commercial, industrial, or financial” purpose. See 28 C.F.R. § 5.304(c).
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