(Reuters) – Chinese companies targeted by sweeping investment ban imposed by former President Donald Trump are considering suing the US government after a federal judge suspended a similar blacklist for Beijing-based smartphone maker Xiaomi on Friday.
Lawyers familiar with the case said some of the banned Chinese companies are in talks with law firms, including Steptoe & Johnson and Hogan Lovells, encouraged by US District Judge Rudolph Contreras’s preliminary injunction, which puts Xiaomi on a US list. of alleged communist Chinese military companies subject to an investment ban.
The Trump administration’s move to blacklist Xiaomi Corp, cutting its market share by $ 10 billion and cutting its shares by 9.5 percent in January, would have forced investors to fully divest their stake in the company to get rid of.
“Companies are contacting lawyers to contest the citations and grounds for the disclosures,” said Wendy Wysong, managing partner of the Hong Kong office of Steptoe & Johnson, a global law firm headquartered in Washington. Wysong and a person familiar with Hogan Lovells, another global law firm, declined to name the companies involved in the discussions.
Contreras marked the U.S. government’s “ very flawed ” process of including the company in the investment ban, based on just two key criteria: the development of 5G technology and artificial intelligence, which the Department of Defense says are “ essential to modern military operations’, and an award for Xiaomi founder and CEO Lei Jun from an organization reportedly helping the Chinese government break down barriers between commercial and military sectors.
The judge noted that 5G and AI technologies were quickly becoming the standard in consumer electronics and that more than 500 entrepreneurs had received the same accolade as Lei since 2004, including the leaders of an infant formula company.
“The facts that led to Xiaomi’s designation are almost laughable, and I think it will definitely lead to more companies seeking help,” said Brian Egan, a Washington attorney, a former legal counsel at both the White House and the United States. Ministry of Foreign Affairs who also works at Steptoe.
GOVERNMENT INDEPENDENT ON THE WAY FORWARD
In a joint filing on Tuesday, the government said it had not decided what would be the “right way forward” in the Xiaomi case in light of the judge’s decision.
A spokeswoman for the United States Department of Justice, defending the case, declined to comment. A Defense Department spokeswoman referred questions to the White House, which has not responded.
Xiaomi and 43 other companies were added to the blacklist here in the waning months of the Trump administration, imposed by a 1999 law requiring the Department of Defense to publish a compilation of companies “owned by or controlled “by the Chinese military.
Seeking to anchor a hardline against China and its Democratic successor, Joe Biden, in a hardline policy, Trump signed an executive order that was later expanded to prevent all U.S. investors from holding securities in the said companies from November 11, 2021.
Other companies listed include video surveillance giant Hikvision, China National Offshore Oil Corp (CNOOC), and China’s top chip maker, Semiconductor Manufacturing International Corp.
SMIC, Hikvision and CNOOC did not immediately respond to requests for comment.
Luokung Technology Corp, a card technology company on the list, also filed a lawsuit against the US government earlier this month and is expected to seek a preliminary injunction similar to Xiaomi’s.
Reporting by Karen Freifeld and Alexandra Alper; Additional reporting by Mike Stone; Editing by Peter Cooney