The House Appropriations Committee has quietly directed the Department of Justice to issue new guidance on the commercial exemption to the Foreign Agents Registration Act (“FARA”) with respect to state-owned companies. The directive came in a Committee report accompanying legislation that provides funding for the Department for fiscal year 2020. The report was approved by the Committee on May 22, 2019.

In the report, the Committee said it is “concerned,” that “the Department’s current guidance regarding the FARA commercial exception” has permitted state-owned companies “to dodge FARA requirements” even when the companies “take actions that directly promote the political and policy interests of their government owners.”

The Committee therefore “direct[ed]” the Department to issue updated commercial exemption guidance that would “requir[e] U.S. agents of wholly state-owned enterprises to register under FARA in those circumstances where the lobbying and public-relations efforts of such foreign firms promote not only the commercial interest of the entity, but also the foreign government’s stated political and policy interests.”

It is not clear which current FARA guidance the Committee found deficient. Both commercial exemptions—one statutory and one regulatory—contain limitations that appear to go directly to the issues cited by the Committee. The regulations implementing both exemptions specifically provide that the exemptions can only be used if the “activities do not directly promote the public or political interests” of a foreign government.

The regulations have additional provisions related to state-owned enterprises, including provisions that explicitly permit such companies to use the exemptions. The regulation for the statutory commercial exemption goes further and permits its application to companies “controlled” by a foreign government. The regulatory commercial exemption, in contrast, specifically excludes application to activities directed by a foreign government.

It will be interesting to see whether the Department’s FARA Unit issues informal guidance in response to the Committee’s requirement, or whether it pursues formal rulemaking to revise the provisions noted above (or, perhaps, it does nothing because the directive is contained in report language, rather than a statute). Additionally, although the new guidance is required to address only wholly state-owned companies, this action opens the commercial exemption to potentially broader action by the Department. We will watch closely for developments.