Alibaba wins preliminary injunction against Pentagon lobbying rule

Alibaba has won a preliminary court order blocking a US restriction that drove away its Washington lobbyists, after a federal judge found the Chinese technology giant was likely to succeed in challenging the measure on free-speech grounds.

US District Judge Eumi K. Lee ruled on Monday that the government had failed to provide sufficient evidence to justify the restriction, which effectively forces lobbying firms to choose between representing Alibaba and clients seeking Pentagon contracts.

Alibaba owns the South China Morning Post.

The decision allows Alibaba to retain lobbyists who also represent defence contractors while its lawsuit proceeds. It does not remove the company from the Pentagon’s list of alleged Chinese military companies or resolve its challenge to that designation.

“By restricting Alibaba’s ability to retain lobbyists, Section 4663 functionally restricts its political speech,” Lee wrote in the 26-page order issued in the Northern District of California.

The law, which took effect on June 30, bars the Pentagon from entering into contracts with companies – or their parents or subsidiaries – that retain lobbyists working for businesses on its Section 1260H list of Chinese military companies.

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The 1260H list updated in June has expanded significantly into sectors such as the internet, new energy, biotechnology and semiconductors. Other prominent companies included alongside Alibaba in the same cohort feature Baidu, BYD, Nio, Unitree Robotics and WuXi AppTec.

Although the restriction operates through defence contracts, its consequences for Alibaba’s access to US policymakers were substantial, according to evidence cited in the ruling.

Before its designation, Alibaba had retained more than two dozen lobbyists and multiple lobbying firms to represent its interests before Congress and the executive branch. By June 30, it had no registered lobbyists.

Several firms told Alibaba they were withdrawing because of the law, according to the order. Some had represented the company for almost a decade.

Alibaba argued that losing those representatives left it sidelined as Washington considered policies affecting its business, including artificial intelligence, consumer product imports and device authorisations.

The government defended the restriction as a national security measure, arguing that designated companies could obtain sensitive military information through shared lobbyists or use those relationships to influence Pentagon decisions.

The Pentagon did not immediately respond to a request for comment.

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Lee acknowledged the importance of national security but found that the government had not substantiated those risks sufficiently to justify restricting speech.

Its sole supporting exhibit was a congressional explanatory statement that called for a study of risks involving consulting firms working with both the Pentagon and the Chinese government or its affiliates. The statement contained no findings about the risks posed by lobbyists representing designated companies, she wrote.

The government also failed to demonstrate why less restrictive alternatives, such as disclosure requirements, would be inadequate, the judge found.

Alibaba sued on June 23 after the Pentagon included it in a June update to the military-company list. The department had also named Alibaba in a February notice that was withdrawn shortly after being posted.

The Pentagon cited Alibaba’s alleged affiliations with China’s state assets regulator and the Ministry of Industry and Information Technology as grounds for its designation, according to the order.

Alibaba disputes those grounds. In submissions described by the court, the company said it did not have a close relationship with the state assets regulator and characterised its relationship with the ministry as that of a regulated company dealing with its regulator.

Monday’s preliminary injunction follows an earlier temporary restraining order that was due to expire that day. The relief applies specifically to the lobbying-related restriction concerning Alibaba; the judge declined at this stage to block the law across the board or remove the company’s military designation.

The company did not immediately respond to a request for comment.