Lobbying firms can again work for Alibaba without risking Defense Department contracts, but Alibaba stays on the 1260H list, whose purchasing curbs widen to third-party suppliers in 2027.
A federal judge in San Jose has barred the Pentagon from enforcing a lobbying restriction against Alibaba, ruling on October 26 that the rule likely violates the company’s free-speech rights. The preliminary injunction stops the Defense Department from refusing contracts to companies because they share a lobbying firm with Alibaba, according to DroneXL, a drone-industry publication that reviewed the 26-page order. Neither Alibaba nor the Defense Department commented on the ruling, The Next Web reported.
The restriction, which took effect on June 30, cut Alibaba off from Washington almost overnight. It bars the Pentagon from contracting with any company that uses a lobbying firm also working for a company on the Section 1260H list, the Defense Department’s register of what it calls Chinese military companies. Alibaba was added to that list on June 8. Its lobbying firms then withdrew one after another, leaving it with no registered lobbyists by the end of June.
The ruling restores Alibaba’s ability to hire advocates in Washington while its main lawsuit continues. It does not take Alibaba off the 1260H list, and the company’s claims against the designation itself remain pending before the same court.
The court found little evidence that lobbyists pose a security risk
Judge Eumi K. Lee of the Northern District of California, who has presided over the case since Alibaba sued in June, applied the strictest test US courts use for limits on speech, DroneXL reported. The government’s only exhibit was a 2024 congressional explanatory statement, which the judge said contained no finding that lobbyists for listed companies endanger national security. DroneXL quoted the order as saying that the only rational choice for a lobbying firm was to stop representing Alibaba.
The relief is narrow. The judge rejected, at this stage, Alibaba’s argument that the law is unconstitutional for every company, applied the injunction to Alibaba alone and set a bond of US$100, DroneXL reported. Doubts about the government’s case were visible earlier: at an August 27 hearing in San Jose, Lee called the government’s record on risk and harm thin, Courthouse News Service reported.
The lobbying rule began as Section 851 of the defense authorization act passed for fiscal 2025. Alibaba said in a July court filing that all of its more than two dozen registered lobbyists had withdrawn their registrations. Bloomberg reported the filing in a story republished by Fortune. Several of the departing firms had represented Alibaba for close to a decade, and some cited the law as their reason for leaving, DroneXL reported.
The 1260H designation itself is still in force
Alibaba joined the list in a June update that also added Baidu, BYD, NIO, WuXi AppTec, Unitree, RoboSense, CXMT and YMTC, Reuters reported at the time. The listing carries no sanctions, but it limits direct Pentagon contracts from late June 2026 and purchases through third-party suppliers from 2027. Alibaba denies having ties to China’s military.
Several listed Chinese companies are now fighting the designation in court. Two BYD subsidiaries sued over the same lobbying law in September on free-speech grounds, WuXi AppTec won a court order in August, and DJI is still contesting its listing after an appeals court ordered the Pentagon to reconsider, according to The Next Web. CXMT took its designation to court in August.
The financial stakes for Alibaba are modest. Morningstar analyst Chelsey Tam told Dow Jones the injunction is a symbolic and procedural win rather than a fundamental change, and Morningstar notes that Alibaba has little business in the United States, The Next Web reported. The precedent may matter more. DroneXL found that DJI, on the list since October 2022, still reported two outside lobbying firms in its third-quarter filings, a sign that the law has not cut off every listed company in the same way.
The next rulings will decide how far the precedent reaches
There was no sign yet of whether the government would appeal. In July, when the two sides agreed to pause enforcement against Alibaba until the court ruled, the Pentagon maintained that the restriction fully complies with the US Constitution.
The pending BYD case will show whether other courts accept the same free-speech reasoning for other listed companies. For Alibaba itself, the larger question is the challenge to its 1260H designation, which a court would have to decide before the 2027 restrictions on purchases through third-party suppliers begin. A ruling on that claim, or a decision by the Pentagon to drop Alibaba from its next annual update of the list, is the development that would change the company’s position in the US market.