The many press reports regarding the foreign clients of Paul Manafort, Tony Podesta and others have thrust the Foreign Agents Registration Act into the limelight. Already there is congressional action underway, with legislation introduced in the House and Senate to eliminate the exemption from filing under FARA if one registers under the Lobbying Disclosure Act, under U.S. Code 22, 613(h). The exemption is not available to registrants who represent foreign governments and foreign political parties, under sections 611(b)(2) and (b)(3), respectively.
But merely eliminating that exemption will not bring more transparency to the activities of foreign entities — and might well add additional opacity to the area.
The enactment of the LDA/FARA exemption in 1995 also eliminated FARA’s 1(q) “domestic subsidiary exemption.” Under that former provision, a U.S. subsidiary (an otherwise foreign agent) was exempt from FARA registration on behalf of its foreign parent (an otherwise foreign principal) if the subsidiary’s activities did not “predominantly serve the interests” of the foreign parent. This exemption was difficult to apply, as it was subjective with little guidance as to what “predominantly” serves a foreign parent’s interests.
{mosads}Some argue that if the subsidiary is making money for the foreign parent, isn’t everything it does predominantly in its interest? Others have a more limiting view, believing that if the subsidiary were lobbying or performing other activities that directly benefit the subsidiary, the fact that that the foreign parent indirectly benefits excuses the subsidiary from registering under FARA. As a result, many, if not most, U.S. subsidiaries relied on the exemption and did not register. The LDA/FARA exemption was supposed to eliminate that ambiguity and get more U.S. subsidiaries to register somewhere, since the LDA test was more objective.
But that was not the end of it. In order to avail itself of the LDA/FARA exemption, a U.S. subsidiary of a foreign corporation had to have at least one individual who met the definition of lobbyist — if it did not, it could not register under the LDA and was still subject to FARA. For example, from 1995 to 1998, a U.S. subsidiary that performed activities that triggered FARA but not the LDA, such as public relations and grass-roots lobbying, could not register under the LDA. In 1998, the LDA was amended to allow entities to register even if they were not required to do so. To be sure, registration under the LDA is preferable for many reasons, and as a result of the 1998 amendment, more U.S. subsidiaries registered under the LDA that otherwise might have mistakenly or otherwise relied on the 1(q) exemption.
Merely eliminating the LDA exemption to FARA will cause hundreds — if not more — U.S. subsidiaries of foreign corporations to register and report under FARA if the subsidiary lobbies with reference to formulating, adopting or changing the domestic or foreign policies of the United States [611(o)], or engages in any public relations pertaining to the political or public interests, policies, or relations of its foreign parent [611(g)].
Today, under the LDA/FARA exemption, a registrant who represents a foreign corporation, such as its U.S. subsidiary, may register under the LDA instead of FARA. This is the case even if the foreign corporation has foreign government ownership, provided that the registrant’s political activities are in furtherance of the bona fide commercial, industrial or financial operations of the foreign parent. To increase transparency and promote the public good, perhaps more information regarding this relationship should be required on the LD-1 Registration and LD-2 Lobbying Reports. In fact, there could be a separate set of questions and requirement to disclose additional information for foreign entities or U.S. entities with foreign ownership within the current LDA reporting framework.
In any disclosure scheme, there will be a small number who seek to circumvent the law corruptly. For those, there must be swift enforcement action taken and punishment. But for the majority who wish to comply, a disclosure scheme should be as simple as possible to understand and comply with.
Requiring additional information under the LDA could serve multiple salutary purposes. Let’s not let the perfect be the enemy of the good.
Thomas Spulak is a partner and head of King & Spalding’s Government Advocacy & Public Policy group. He served as staff director and general counsel of the House Rules Committee and general counsel of the House.