Alibaba wins injunction against Pentagon contract restrictions tied to China blacklist

By Eduardo Baptista and Laurie Chen

Oct 26 (Reuters) - A US federal judge on Monday granted Alibaba Group Holding’s request for a preliminary injunction, ordering the US government not to deny Pentagon contracts to companies because they, their parent companies or subsidiaries do business with firms that engage in lobbying activities for the e-commerce giant.

Alibaba sued the US government in June after the Pentagon added it to a list of companies allegedly aiding China’s military, alongside internet search provider Baidu, EV maker BYD and other major Chinese manufacturing and technology firms.

Monday’s ruling means Alibaba will be able to retain US lobbyists who also represent Pentagon contractors, removing a potential obstacle to the company’s efforts to challenge its designation as a Chinese military company.

Alibaba fired dozens of its Washington lobbyists after the Pentagon action in June, according to a source with direct knowledge of the matter who was not authorised to speak to the media.

The designation does not impose formal sanctions, but restricts Pentagon contracts with listed companies and, from 2027, purchases of their products or services through third parties.

Other listed Chinese tech firms were also concerned about the designation’s impact on international lobbying activities as well as the indirect procurement ban, which would completely remove Chinese products from US defence contractors’ supply chains, the source added.

Alibaba has denied any military ties, saying its products and services are built for retail, logistics, and enterprise technology rather than defence or intelligence.

"The determinations have no basis in fact or law," Alibaba said in its lawsuit in June, seeking its removal from the list.

Monday’s injunction does not remove Alibaba from the Pentagon list, which the company is continuing to challenge in court.

Alibaba did not immediately respond to a request for comment on the injunction.

COMPANIES TAKE LEGAL ACTION

 Alibaba is one of several Chinese firms taking legal action to challenge their placement on the Pentagon’s list.

Last month, two subsidiaries of the world’s largest electric vehicle maker BYD sued the US Department of Defence over a federal law banning any Pentagon contractors from hiring lobbyists that also work with blacklisted firms, arguing that it breached BYD’s First Amendment rights. 

In August, DJI, the world’s largest drone maker, appealed its inclusion on the blacklist with the court finding merit in its argument that unclassified records did not support ​the conclusion that the company contributed to the Chinese defence industrial base.

The appeals court ordered the lower court to reconsider its decision to reject DJI’s bid to be removed from the Pentagon list and the case is ongoing.

The same month, biotech firm WuXi AppTec Co also won a preliminary injunction from a US federal court, which blocked its inclusion on the list. WuXi said the Pentagon designation was politically motivated.