Preliminary Ruling Shields Alibaba from Contracting Restriction Tied to Its Lobbyists

Key Facts

A U.S. federal court issued a preliminary order in Alibaba’s favor on October 26 in its lawsuit against the Department of Defense, barring the government from refusing to contract with an entity or denying it the opportunity to contract with the department because of its contractual relationship with an entity that lobbies on the company’s behalf. The bar also covers cases in which the entity contracting with the lobbying firm is a parent or subsidiary of the entity seeking the contract. The ruling is limited to application of the restriction related to lobbyists representing Alibaba; it does not pause other restrictions or cover every company listed by the Pentagon. The court said the company was “likely to succeed” in its challenge to the law’s application to it, but found that it had not shown at this stage that the law was invalid in its entirety. The decision gives the company temporary protection for its political activity, while the underlying dispute over its designation remains ongoing.

Alibaba argued in its request that Section 4663 violates its First Amendment rights to speak to and petition the U.S. government. The court concluded that the government had not sufficiently justified restricting that speech, and found that the company had met the requirements for preliminary relief in its challenge to how the law applies to it. Alibaba had asked the court to remove its name from the Chinese Military Companies list, halt application of the section to all entities, or limit the pause to entities that contract with its lobbyists. The court chose the narrower option, tying the protection to Alibaba and to entities whose contracts could be affected by lobbyists representing the company. This is not a final ruling in the lawsuit or a removal of its designation.

The Department of Defense publicly announced Alibaba’s designation as a Chinese military company on February 13, 2026, according to the court’s ruling. The company filed its lawsuit on June 23, before the restriction set out in Section 4663 took effect on June 30. The law bars the department from contracting with a company that retains the same lobbying firm representing a listed company. This differs from saying the designation was first announced in June; the court record distinguishes between the public announcement in February and the action taken by the department in June. The preliminary order does not remove Alibaba’s name from the list, its inclusion on which the company continues to challenge.

Before its designation, Alibaba hired more than 24 lobbying firms and specialist companies to present its interests to Congress and the executive branch, the court said. The issues addressed by its representatives included expanding exports and promoting exports by small companies, as well as technology policy and access to U.S. capital markets. They also included e-commerce, consumer protection and intellectual property. After the Pentagon’s action in June, the company laid off dozens of lobbyists in Washington, according to a source familiar with the matter cited by Reuters. This context shows the direct link between the legal restriction and the company’s activity in communicating with U.S. officials, the activity covered by the temporary protection.

Alibaba told the U.S. Securities and Exchange Commission in a filing that its inclusion on the list was “wrong” and that there was “no basis” for treating it as a military company or as part of China’s military-civil fusion strategy. In its annual report, the company warned that the designation could harm its reputation, supply chain, operations and securities prices, even though it does not impose an official ban on it. Reuters reported that other listed Chinese companies had expressed concern about the designation’s impact on international lobbying activities. It also reported that a ban on indirect purchases could exclude Chinese products from the supply chains of U.S. defense contractors. These concerns remain separate from the specific scope of the order issued in Alibaba’s favor.

The designation imposes no formal sanctions, but it restricts Pentagon contracts with listed companies; the restrictions will also extend from 2027 to the purchase of their products or services through third parties, according to Reuters. After issuing the preliminary order, the court decided to expedite consideration of the briefs on the request for summary judgment on the merits of the dispute. It found that pausing application of the section to Alibaba, while moving quickly on those briefs, was temporarily sufficient to address third-party concerns pending a decision on the merits. The court ordered the company to deposit a bond of 100 dollars with the court clerk and provide proof of the deposit by October 30, 2026. In trading, Alibaba shares listed under the ticker BABA closed at 100.96 dollars on October 28, compared with 101.82 dollars on October 22; the data provided do not include details that would allow the share-price movement to be linked to the ruling.