Covert Activity Curbs Close to Final Passage : Legislation: The rules would require the President to provide advance approval of secret projects. Iran-Contra case led to the new measures.

Seeking to prevent the kind of abuses that contributed to the Iran-Contra scandal, Congress is expected to enact this month new rules that clarify and restrict the President’s ability to authorize covert activities in other countries.

The rules, worked out during three years of intermittent negotiations between the White House and congressional Democrats, require the President to provide written authorization for secret activities and bar retroactive approval of such projects.

The procedures address some of the abuses brought to light during the 1987 congressional hearings into the Ronald Reagan Administration’s sale of arms to Iran and the diversion of profits to the Contra rebels in Nicaragua. Such aid had been prohibited by Congress.

The rules already have been approved by the Senate and are expected to be enacted after a conference committee reconciles Senate and House versions of this year’s intelligence legislation. Final action is expected before Congress’ expected adjournment a week from today.

The compromise language under consideration appears to satisfy most congressional and interest group concerns about abusive executive branch action, while protecting the President’s authority to conduct foreign policy.

The authorization rules were put into effect by presidential order after the Iran-Contra hearings three years ago. Under the proposed legislation, however, they would become legally binding on the executive branch.

Besides mandating advance authorization in writing, the rules require that the written “finding” (so called because the President “finds” that U.S. interests will be served by the covert activity) identify every agency and third party involved in the operation.

In the Iran-Contra hearings, Reagan said that he did not remember authorizing the arms transfers. His national security adviser, Adm. John M. Poindexter, said that Reagan retroactively authorized the sales in writing. But Poindexter said he destroyed the authorization to save Reagan political embarrassment.

The National Security Council staff ran most of the Iran-Contra activities from the White House. The operations involved actions by several foreign governments, including Israel and Saudi Arabia, as well as a number of private contractors, none of which had to be disclosed under existing law.

The new legislation also expands the definition of covert activity. Existing law describes covert action as any action by a U.S. intelligence agency abroad “other than activities intended solely for obtaining necessary intelligence (i.e., information gathering).”

The Senate measure defines covert action as any activity “conducted by an element of the U.S. government to influence political, economic or military conditions abroad so that the role of the U.S. government is not intended to be apparent or acknowledged publicly.” The proposed new definition excludes several types of operations, including those in which the “primary purpose” is to collect intelligence, conduct counterspy operations, or engage in law enforcement activities such as anti-drug efforts.

Some public policy groups maintain that the new language would authorize the involvement of any government agency, not just intelligence, as well as foreign governments and contractors as long as they are identified in a presidential finding. That would legalize some of the abuses uncovered during the Iran-Contra affair, the critics contend.

The new rules also make it the responsibility of the President, rather than the director of the Central Intelligence Agency, to keep Congress “fully and currently” informed on covert actions.

On what is perhaps the most sensitive issue involving covert notification--how soon the President should report such operations to members of Congress--the new rules remain essentially the same as the existing law, which was passed in 1975.

The law states that the President should inform the House and Senate Intelligence committees that he has authorized a covert action before the activity is initiated but that he can “on rare occasions” begin the operation without first notifying the committees. When he does, he must report to the committees “in timely fashion” on the operation and why he did not give prior notice. No definition of timely fashion is provided, although key senators have stated that it means “no more than a few days.”

Similar language did not prevent Reagan from keeping the Iran-Contra activities secret for more than a year. In fact, his administration never formally notified Congress about those operations before acknowledging them in the course of the congressional hearings.

The American Civil Liberties Union and others complain that the language in the Senate bill would for the first time “authorize the conduct of covert action.” Existing law phrases this permission only in a negative context, stating that no funds could be spent on covert action “unless and until” the President finds each operation important to national security.

The ACLU considers the negative formulation essential because it opposes all covert action in principle. Rep. Anthony C. Beilenson (D-Los Angeles), chairman of the House Intelligence Committee, indicated that House conferees would accept that view in an effort to win ACLU endorsement of the legislation.