November 18, 2019
In a rule that could have wide-reaching consequences, the Department of Justice recently issued a legal opinion that appears to exempt a Saudi-owned oil company’s lobbyists from registering under the Foreign Agents Registration Act (FARA), according to a CREW analysis of lobbying disclosures and DOJ records. The lobbyists have instead been permitted to disclose their work under the less rigorous Lobbying Disclosure Act (LDA).
As a result, information that would have been disclosed under FARA—including detailed lists of the lobbyists’ meetings with government officials—has effectively been withheld from the government and the public, thus hiding details of a lobbying campaign that could be considered part of Saudi Arabia’s U.S. influence efforts.
More broadly, the DOJ’s legal opinion appears to establish a general loophole in FARA that allows corporations that are wholly owned by a foreign state-owned company to obscure the full extent of their influence efforts in the United States. This is a highly concerning policy, especially since it seems to have been put in place in response to a request from a company owned by the Saudi Arabian government, which has a long history of seeking to influence the U.S. government through both open and covert means.
The opinion appears to have prompted a direct rebuke from the House Appropriations Committee, which has stated its belief that the DOJ’s current guidance allows state-owned entities to avoid FARA registration even while promoting their foreign owners’ interests.
The Justice Department’s opinion
In March, the Justice Department’s FARA Unit released a new legal advisory opinion in response to a letter sent by an unidentified lobbying firm in January. This legal guidance states that the lobbying firm, which at the time intended to represent a U.S. subsidiary of a foreign state-owned corporation, would be exempt from registration under FARA as long as the subsidiary’s activities were directed by its own U.S.-based employees and its lobbying only served its own commercial interests and not those of its foreign owner.
This is an application of FARA’s “commercial exemption,” which allows foreign interests to lobby the government without registering under FARA as long as they only lobby on issues of a purely commercial nature. The commercial exemption does not typically apply, however, when a foreign agent’s activities “directly promote the public or political interests” of a foreign government.
Although the legal opinion does not name the lobbying firm that requested it, facts point towards one likely source. In May, the Nickles Group, a Washington, D.C. lobbying firm, registered under the LDA as lobbyists for Motiva Enterprises, a wholly owned Houston-based subsidiary of Saudi Aramco, Saudi Arabia’s national oil company. Subsequently, in July, the Nickles Group filed a report indicating that it had lobbied both chambers of Congress on Motiva’s behalf.
In the publicly available version of the DOJ’s March legal opinion, all names of specific entities have been redacted. Still, certain details seem to indicate that the U.S. subsidiary and foreign state-owned corporation mentioned in the opinion are, in fact, none other than Motiva and Aramco. First, the opinion refers to “a wholly-owned US subsidiary of a foreign corporation that is itself wholly owned by a foreign government”; second, the opinion states that this U.S. subsidiary “employs over 2,300 persons in the United States.” Since the opinion was issued, only a handful of lobbying clients have been registered that fit the first of those descriptions. Of them, only Motiva, whose website proudly mentions its “2,300 dedicated US employees,” fits the latter description.
Given these facts, it seems highly likely that the U.S. subsidiary mentioned in the DOJ’s legal opinion is in fact Motiva Enterprises, and that the opinion is what has allowed the company’s lobbyists to avoid disclosing their activities under FARA. (Motiva Enterprises and the Nickles Group did not respond to multiple requests from CREW for comment.)
In October, the Institute for Strategic Global Security (ISGS), a group that describes itself as a “full service advocacy firm representing the interests of our client before influential lawmakers,” registered under the LDA as a lobbyist for Motiva. Like the Nickles Group, ISGS has not registered or filed any documents under FARA related to its work for Motiva.
A FARA loophole, and a response from Congress
The FARA exemption granted to Motiva is noteworthy enough on its own. But there’s another layer to this story: The DOJ’s legal opinion appears to have prompted a high-level policy dispute between the executive branch and Congress. More specifically, the House Appropriations Committee seems to believe that DOJ’s guidance has effectively created a loophole in FARA, allowing foreign government-owned U.S. commercial entities like Motiva to avoid registering as foreign agents even while participating in political activity that promotes their owners’ interests.
This position was communicated in the following statement, published by the committee in June as part of a broader congressional report on agency funding:
The [Appropriations] Committee is concerned about the [Justice] Department’s current guidance regarding the FARA commercial exception. The Committee believes the guidance has allowed U.S. agents of some state-owned enterprises, which are wholly-owned by their governments, to dodge FARA requirements, even though such enterprises take actions that directly promote the political and policy interests of their government owners.
Since the legal opinion released this March was the DOJ’s most recent guidance on FARA’s commercial exemption when the congressional report was released—and the only one that touches upon this specific issue—it seems overwhelmingly likely that it is the guidance that the Appropriations Committee’s statement refers to.
Looking ahead, Motiva is not the only company that could be exempted from FARA registration by the DOJ’s recent guidance; the same precedent also applies to other foreign-owned U.S. companies in similar positions to Motiva. Additionally, Motiva’s lobbyists have claimed that their activities have not been directed by their client’s foreign owner, and no evidence exists indicating that this is not the case.
Still, the extension of FARA’s commercial exemption to Motiva’s lobbyists serves as a good example of why DOJ’s March advisory opinion has raised eyebrows in Congress. While Motiva is based in the United States, the Aramco subsidiary that owns it is registered under FARA as a foreign agent of Saudi Arabia, and its ultimate owner, Saudi Arabia, is a country with an extensive and multi-pronged U.S. influence operation. The timing of Motiva’s interest in federal lobbying is notable as well: Prior to its full acquisition by Aramco, the company had never lobbied the federal government or hired lobbyists to do so.
It is also difficult, in practice, to separate Motiva’s policy interests from Aramco’s, which, in turn, are those of their owner, Saudi Arabia. In the most recent quarter, Motiva’s lobbyists contacted both chambers of Congress to discuss the renewable fuel standard, a policy that requires transportation fuel sold in the United States to contain a certain proportion of “renewable” fuels, usually corn ethanol. This policy affects both Motiva, as an American oil refinery, and Aramco, as a company that sells fossil fuels in the United States; Aramco’s most recent bond prospectus explicitly mentions “mandates for renewable energy” as a source of risk for its business.
Even if Motiva’s lobbying efforts are as independent as the company’s lobbyists have claimed, these facts show why they still merit rigorous scrutiny under FARA.
Under the DOJ’s current guidance, the only thing that lobbyists for foreign state-owned U.S. companies have to do to avoid FARA registration is claim that their lobbying activities will be conducted without foreign input. U.S. authorities have no way to verify these sorts of claims; they must instead simply take lobbyists at their word while allowing them to avoid rigorous disclosure of their activities under FARA. In other words, much as the Appropriations Committee’s statement claims, the DOJ’s legal guidance has indeed created a loophole in FARA—potentially allowing foreign state-owned corporations to obscure their influence efforts by having U.S.-based subsidiaries claim operational independence.
In recent years, it has become more apparent than ever that legal honor systems like this are not sufficient to prevent political operatives and bad actors from violating the spirit of the law. In order for America’s government and public to be as informed as possible about foreign influence efforts in this country, this policy deserves a second look.