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Federal judge blocked application of US investment ban on Xiaomi Corp.
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, calling the decision to blacklist the Chinese tech giant “deeply flawed.”
Ordering a temporary halt to the ban in a ruling on Friday night, Judge Rudolph Contreras questioned the Pentagon’s January decision to designate Xiaomi as a company with ties to the Chinese military. Judge Contreras said the United States had not convincingly demonstrated such links in previous court filings.
“Xiaomi is a publicly traded company that manufactures commercial products for civilian use, is controlled by its independent board of directors and controlling shareholders, and is not effectively controlled or associated with others under the ownership or control of control of the PRC or its security services, ”the judge said in the notice, using the abbreviation of the People’s Republic of China.
Xiaomi said he was happy with the judge’s ruling and said he would seek the permanent removal of the investment ban. The Pentagon did not immediately respond to a request for comment.
The move marks a victory for Xiaomi after it was added, in the final days of the Trump administration, to the U.S. Department of Defense list of companies it said were linked to the Chinese military. The move prevented Americans from investing in the company, the world’s third-largest seller of smartphones.
This designation surprised many observers of the company, given the company’s heavy focus on consumer electronics. The company, which denies any military connection, has filed a lawsuit in U.S. District Court in Washington, DC, seeking to overturn the designation.
The Defense Ministry then justified its decision by citing an award given to its founder, Lei Jun, in 2019 for his services to the Chinese state, as well as the company’s ambitious plans to invest in 5G and artificial intelligence.
But the US court ruling on Friday called the rationale flawed, noting that more than 500 contractors received a similar award. He also said 5G and AI “are fast becoming the industry standard for consumer electronics” and investments in technology don’t necessarily suggest a military link.
While the ruling only grants a reprieve to Xiaomi, Judge Contreras said the Defense Department’s decision caused irreparable harm to Xiaomi and the company would likely prevail by winning the full overthrow of the investment ban. Xiaomi’s shares fell sharply following its blacklisting and it was on the verge of being removed from major stock exchanges and indexes.
The decision is another setback in the courtroom in the Trump administration’s campaign against the Chinese tech sector. Last year, two federal judges temporarily suspended the ban on U.S. downloads of China’s social media app TikTok, saying the United States had overstepped its authority.
Other Chinese companies have waged legal battles in the United States in response to the actions of the Trump administration with less success. For example, a U.S. judge last year dismissed a lawsuit by telecommunications giant Huawei Technologies Co. that sought to overturn a U.S. ban on its products. Huawei is still pursuing legal action in the United States
Write to And Strumpf at [email protected]
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Appeared in the print edition of March 13, 2021 under the title “The judge blocks the ban on investing in Xiaomi”.
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