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U.S. Court Blocks Trump-Era Trading Ban on Xiaomi Stock美国法院阻止特朗普对美国人投资小米的禁令

March 26, 2021

by Catherine X. Pan-Giordano, Lawrence Ward, and Dave Townsend

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The U.S. District Court for the District of Columbia recently ruled that certain securities trading restrictions will be prevented from going into effect with respect to Xiaomi Corporation (“Xiaomi”) under Section 1237 of the National Defense Authorization Act for Fiscal year 1999, as amended (“Section 1237”). In its opinion, the court found that Xiaomi was likely to succeed on the merits of its claims that the United States government’s designation of Xiaomi as a Communist Chinese military company (“CCMC”) was not supported by substantial evidence and violated the Administrative Procedure Act (“APA”). Accordingly, the court enjoined restrictions on the trading of Xiaomi securities and derivatives that had been imposed due to its CCMC designation. Although the preliminary injunction order specifically applies to Xiaomi, the case may ultimately impact other Chinese companies designated as CCMCs under Section 1237, or U.S. persons investing in securities of designated CCMCs.

美国哥伦比亚特区地区法院最近判定，根据经修订的《1999财政年度国防授权法》第1237条（"1237条"）而针对小米公司（“小米”）的若干证券交易限制将被阻止生效。法院在其判决中认为，小米公司在诉讼中的主张 -- 即美国政府将小米公司指定为中国共产党涉军企业（“中国涉军企业”）没有实质性的证据支持并且违反了《行政程序法》（“行政程序法”）-- 很可能最终获得法院支持。因此，法院初步禁止了因小米被指定为中国涉军企业而对小米证券及其衍生品的交易实施的限制。虽然该初步禁令适用于小米，但此案可能最终影响到其他根据第1237条被指定为“中国涉军企业”的中国公司，以及投资指定中国涉军企业证券的美国人。

Background on Section 1237 Designations. 关于第1237条的背景

On January 14, 2021, the U.S. Department of Defense (“DoD”) designated Xiaomi as a CCMC. Section 1237 defines a CCMC as: (i) an entity owned or controlled by, or affiliated with, the People’s Liberation Army, or a ministry of the government of the People’s Republic of China, or that is owned or controlled by an entity affiliated with the defense industrial base of China; and that (ii) is engaged in providing commercial services, manufacturing, producing, or exporting. Under Executive Order 13959 issued on November 20, 2020, as amended (“EO 13959”), U.S. persons cannot engage in certain transactions with respect to the publicly traded securities and derivatives of CCMCs 60 days after the designation by DoD. We previously issued an update on EO 13959 and Section 1237 here. DoD has designated a total of 44 entities under Section 1237 in five tranches that have been issued since June 2020.

2021年1月14日，美国国防部指定小米为中国涉军企业。第1237条对中国涉军企业的定义是：(i)由中国人民解放军或中华人民共和国政府部委拥有或控制的，或与之有关联的，或由与中国国防工业基地有关联的实体拥有或控制的；并(ii)从事提供商业服务、制造、生产或出口的任何实体。根据2020年11月20日发布的13959号行政命令（包括其修订，以下简称 “《13959号行政命令》”），在美国国防部指定后60天内，美国人不能参与有关中国涉军企业的公开交易证券和衍生品的某些交易。本所先前在此处发布了关于《第13959号行政命令》和第1237条款的最新消息。美国国防部根据第1237条共指定了44个实体，自2020年6月起分五批发布。 

As a result of DoD’s designation of Xiaomi, U.S. persons would have been barred from engaging in certain transactions with respect to Xiaomi’s securities or derivatives as of March 15, 2021. EO 13959 permits U.S. persons to engage in divestment transactions for one year following a Section 1237 designation, after which time merely possessing the securities becomes prohibited for U.S. persons.

由于美国国防部将小米公司指定为中国涉军企业，从2021年3月15日起，美国人将被禁止从事与小米公司证券或衍生品相关的某些交易。《第13959号行政命令》允许美国人在第1237条指定后一年内进行撤资交易，之后美国人仅持有证券也将被禁止。

The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) is tasked with administering and enforcing the sanctions against CCMCs. OFAC guidance states that EO 13959 broadly applies not only to the securities of CCMCs, but also to derivatives and other investment vehicles that provide exposure to the securities of the CCMCs (e.g., exchange traded funds (“ETFs”)). Certain of the CCMCs have securities traded on U.S. exchanges while others have securities traded on non-U.S. exchanges. Notably, EO 13959 applies to trading activities of U.S. persons, and covers transactions outside of the United States that involve U.S. persons, including U.S. persons that merely facilitate or have tangential involvement in trading of CCMC securities. Accordingly, the impact of EO 13959 includes companies involved in investing in a variety of financial instruments and financial activities worldwide.  OFAC has issued a general license authorizing certain activities of securities exchanges operated by U.S. persons. 

美国财政部外国资产控制办公室（“外国资产控制办公室”）负责管理和执行对中国涉军企业的制裁。外国资产控制办公室的指南指出，第13959号行政命令不仅广泛适用于中国涉军企业的证券，还适用于为中国涉军企业的证券提供风险敞口的衍生品和其他投资工具（例如，交易所交易基金（“ETF”））。某些中国涉军企业的证券在美国交易所交易，而其他则有证券在非美国的交易所交易。值得注意的是，《第13959号型行政命令》适用于美国人的交易活动，并涵盖在美国境外涉及美国人的交易，包括仅仅为中国涉军企业证券交易提供便利或有间接参与的美国人。因此，《第13959号行政命令》的影响包括在全球范围内参与投资各种金融工具和金融活动的公司。外国资产控制办公室已经发出一般许可，授权美国人经营的证券交易所进行某些活动。

Court Opinion. 法院意见

Xiaomi challenged the DoD designation of Xiaomi as a CCMC and the restrictions under EO 13959 in a complaint and a subsequent request for a preliminary injunction to the U.S. District Court for the District of Columbia. In an opinion issued on March 12, 2021, the court granted Xiaomi’s request preliminarily to enjoin restrictions from becoming effective on U.S. person trading of Xiaomi’s securities or derivatives. The court’s opinion found, preliminarily, that:

小米公司在向美国哥伦比亚特区地区法院提出申诉以及随后的初步禁令请求中，对美国国防部指定小米公司为中国涉军企业以及《第13959号行政命令》规定的限制提出了挑战。在2021年3月12日发布的一份意见中，法院同意了小米公司的请求，初步禁止限制措施对美国人买卖小米公司的证券或衍生品生效。法院的判决初步认定：

1. DoD’s explanation for designating Xiaomi a CCMC is inadequate. The court found that DoD had failed adequately to connect its conclusions to facts relating to Xiaomi. 

美国国防部关于将小米公司指定为中国涉军企业的解释不充分。法院认为，美国国防部未能将其结论与小米公司相关事实充分联系起来。

2. Xiaomi does not meet the statutory criteria to be designated a CCMC. Xiaomi is a publicly traded company with an independent board of directors and controlling shareholders and, accordingly, the court did not find support for designating Xiaomi as owned or controlled by or affiliated with the Government of China, the PLA or other Chinese security services (e.g., the defense industrial base of China). 

小米公司不符合被指定为中国涉军企业的法定标准。小米公司是一家上市公司，有独立的董事会和控股股东，因此，法院没有找到支持将小米公司指定为中国政府、解放军或其他中国安全部门（如中国国防工业基地）所拥有或控制或与之有关联的依据。

3. DoD’s designation of Xiaomi lacked substantial evidentiary support under the APA. DoD defended its decision by pointing to Xiaomi’s involvement in fifth generation (“5G”) internet networks and artificial intelligence, and the receipt by Xiaomi’s founder of an award from the Government of China.  The court found that this evidence was insufficient to find that Xiaomi is a CCMC and stated it was “troubled by the lack of any limiting principal” in DoD’s interpretation of Section 1237 as it was applied to Xiaomi. 

根据美国《行政程序法》，美国国防部对小米公司的指定缺乏实质性的证据支持。美国国防部为其决定辩护时指出，小米公司涉足第五代（“5G”）互联网网络和人工智能领域，以及小米公司创始人获得中国政府颁发的奖项。法院认为，这些证据尚不足以认定小米公司是中国涉军企业，并称，其对美国国防部关于第1237条适用于小米公司的解释 “缺乏任何限制性原则而感到不安”。

The court then found that Xiaomi established imminent irreparable harm because of the EO 13959 restrictions and the CCMC designation, and that the balance of harms favored Xiaomi’s request for a preliminary injunction.  It is unclear at this time how the Xiaomi lawsuit will proceed in light of this ruling. 

法院随后认定，由于《第13959号行政命令》的限制和被指定为中国涉军企业，确定小米公司面临迫在眉睫的不可挽回的损害，并且损害的平衡有利于小米公司的初步禁令请求。基于该等裁决，目前尚不清楚小米诉讼下一步将如何发展。

Impact on Other CCMCs. 对其他“中国涉军企业”的影响

The court’s preliminary injunction order specifically applies only to Xiaomi. However, DoD to date has designated 43 other Chinese companies as CCMCs.  The Xiaomi case could impact these other CCMCs, or U.S. persons who trade in their securities or derivatives.

法院的该初步禁令只特定适用于小米公司。不过，美国国防部迄今已将其他43家中国公司指定为中国涉军企业。小米案可能会影响到其他这些中国涉军企业，或买卖这些企业的证券或衍生品的美国人。

Other than Xiaomi, DoD has not publicly released information indicating why it has designated other Chinese companies as CCMCs, or what factual support exists for such designations.  Nonetheless, other CCMCs could challenge their designations as well in federal court. Their likelihood of success will depend on DoD’s factual support for the designation and the Chinese entity’s proximity to the Chinese government, the PLA, and other parts of the Chinese defense industrial base.

除小米外，美国国防部并没有公开发布信息，说明为何将其他中国公司指定为中国涉军企业，或这种指定有什么事实基础。尽管如此，其他中国涉军企业也可以在联邦法院对这些指定提出质疑。他们成功的可能性将取决于美国国防部将该等实体指定为涉军企业的事实依据，以及这些中国公司与中国政府、解放军和中国国防工业基地其他部分的关联和接近程度。

As an example, Luokung Technology Corp. (“Luokung”) has also filed a complaint with the U.S. District Court for the District of Columbia, and is represented by Dorsey & Whitney in that case. Luokung too has obtained a temporary “break” as OFAC also released a frequently asked question (“FAQ”) on March 14, 2021 clarifying that restrictions as to Luokung were delayed until May 8, 2021 because DoD had misspelled the company’s name. Luokung had initially been designated by DoD on January 14, 2021 in the same tranche of CCMCs that included Xiaomi. DoD corrected the error in Luokung’s name on March 9, 2021, after Luokung filed its lawsuit against DoD. 

例如，由美国德汇律师事务所代理的中国企业箩筐技术公司（“箩筐”）此前也向美国哥伦比亚特区地区法院提出了申诉。箩筐也因取得了技术性的临时胜利而获得了更多的努力余地：外国资产控制办公室还在2021年3月14日发布了一条常见问题答复（“FAQ”），澄清对箩筐的限制被推迟到2021年5月8日，原因是美国国防部将该公司的名称拼错。美国国防部最初于2021年1月14日将箩筐列入包括小米在内的同一批中国涉军企业中。在箩筐对美国国防部提起诉讼后，美国国防部于2021年3月9日纠正了箩筐名称中的错误。

In addition, it is possible that the Biden Administration could review CCMC designations and the scope of restrictions under EO 13959, although the Biden Administration has not indicated that it intends to do so. Also, to date, neither DoD nor OFAC have established an administrative review process of Section 1237 designations.

此外，拜登政府有可能对根据《第13959号》行政命令的中国涉军企业的指定和限制范围进行审查，尽管拜登政府尚未表示会打算这样做。此外，到目前为止，美国国防部和外国资产控制办公室都没有建立对第1237条指定的行政审查程序。

Conclusion. 结语

Dorsey & Whitney attorneys are experienced in helping clients understand and examine EO 13959, and assessing their possibility to challenge restrictions imposed under EO 13959. Please do not hesitate to reach out to attorneys linked with this e-Update for further information.

美国德汇律师事务所的律师在帮助客户理解和研究《第13959号行政命令》以及评估中国公司挑战《第13959号行政命令》的可能性方面实战经验丰富。如需更多信息，请垂询本文作者。

 

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Building on the private-fund items in the 2026 Exam Priorities, the 2027 Exam Priorities indicate that the Division will assess private-fund disclosures and controls relating to investment allocations, leverage, affiliated service providers, and fees and expenses. The Division also identified investments in private companies through special purpose vehicles (“SPVs”) and loans provided by private funds and business development companies (“BDCs”) as products the Division will scrutinize. Advisers, particularly private-fund advisers, should evaluate whether their disclosures and compliance programs address these areas. Expanded focus on AI-related cybersecurity risks. While the 2026 Exam Priorities focused on advisers’ use of and representations regarding artificial intelligence (“AI”), the 2027 Exam Priorities specifically highlight AI-enabled cybersecurity threats, including AI-generated phishing and synthetic or “deepfake” voice and video used for social engineering. The shift signals that registrants should consider whether their cybersecurity policies and controls adequately address these evolving threats. New focus on proxy advisory firms. The 2027 Exam Priorities state that the Division will examine advisers that rely on proxy advisory firms, including how those advisers evaluate the firms’ recommendations, assess the bases for those recommendations, identify potential conflicts of interest, and determine whether that reliance satisfies applicable legal obligations. Advisers that rely on proxy advisory firms may wish to consider whether their compliance programs address these areas. Updated focus on Regulation S-P and Regulation S-ID. The 2026 Exam Priorities stated that the Division would engage firms during examinations regarding their progress in preparing incident response programs ahead of the compliance dates for the amendments to Regulation S-P and would examine compliance with the amended rule after those dates. The 2027 Exam Priorities indicate that examinations will focus on whether firms have developed, implemented, and maintained reasonably designed policies and procedures addressing administrative, technical, and physical safeguards to protect customer information and that, in accordance with the amended rule, staff will evaluate response program policies and procedures for unauthorized access to or use of customer information, including customer notification procedures and oversight of service providers. With respect to Regulation S-ID, the 2027 Exam Priorities indicate that examiners will assess whether firms are updating their Identity Theft Prevention Program to address emerging risks, such as those related to AI and stolen credentials. Advisers may wish to consider whether their compliance programs address these areas, as applicable. Summary of Other 2027 Examination Priorities Beyond the developments discussed above, many of the Division’s core examination priorities remain consistent with fiscal year 2026. These include investment adviser fiduciary obligations and compliance programs, examinations of never-examined and recently registered advisers, and cybersecurity and operational resiliency. The Exam Priorities are not exhaustive, and examinations will vary based on each registrant’s business, activities and risks. Advisers should consider the 2027 Exam Priorities in reviewing their compliance programs and preparing for potential examinations, including by: Reviewing risk disclosures and controls. The Division states that, when examining advisers to private funds, it will assess whether investment-related risk disclosures are consistent with fiduciary standards and whether compliance policies, procedures, and controls are designed to address both fund-level and investment-level risks. Reviewing disclosures on allocations, leverage, and affiliated service providers. The 2027 Exam Priorities identify disclosures related to certain investments and allocations, the use of debt and fund-level lines of credit, and the use of affiliated service providers as examples. Confirming the accuracy of fee and expense calculations. The Division states that it will assess the accuracy of fee and expense calculations at both the fund and investment levels, and it identifies fee rebates, cash management, quid pro quo arrangements, deposits, and withdrawals as areas in which economic conflicts of interest may affect the impartiality of advice. Reviewing recommendations of illiquid or hard-to-trade products. The Division states that it will prioritize advisers that recommend products that are difficult to trade, have unusual features, or are illiquid, including loans provided by private funds or BDCs and investments in private companies through SPVs. Confirming that the compliance program is implemented and reviewed. The Division states that it will review compliance program components such as marketing, valuation, and custody, as appropriate, and will typically analyze the annual compliance review. It will also focus on compliance practices when advisers have started advising new asset classes or clients or grown through mergers or acquisitions. 1 SEC Division of Examinations 2027 Examination Priorities. 2 See Dorsey’s Client Alert on the SEC’s fiscal year 2026 exam priorities.

Event/Resource

Corporate Counsel Symposium 2026 Materials Hub

Materials Symposium Agenda Sessions 8:30 am - 9:30 am CT Session A: The Corporate Compass: Finding True North When Ethical Duties Conflict Philip Kaplan, Senior Legal Counsel, Howden Re Lucia Suljic, Vice President, Corporate Legal, Canon USA Nicole Stanton, Partner & Deputy General Counsel, Dorsey & Whitney LLP This panel addresses ethical obligations of in-house counsel, including balancing obligations and duties that may conflict with each other. How should a responsible in-house lawyer deal with those challenging situations? Rather than stick to an academic discussion, this panel will revolve around a series of practical scenarios that are designed to be realistic and timely, including situations where counsel is asked to represent both the company and an individual, how and when to disclose uncomfortable facts and inconvenient documents, issues involving changing firms and companies, and multijurisdictional practice. The panel will feature discussion from two experienced in-house lawyers and Dorsey’s Deputy General Counsel. Session B: Managing Rapid Regulatory Change in International Trade and Cross-Border Investment Nathan Brower, Executive Vice President, General Counsel, Nature’s Sunshine Greg Ogunsanya, Senior Vice President, General Counsel and Corporate Secretary, H.B. Fuller Kathryn Wood, Senior Vice President & General Counsel, DecoPac, Inc. Dave Townsend and Lawrence Ward, Dorsey & Whitney LLP This program is designed for attorneys advising on cross-border transactions, international trade, regulatory compliance, and corporate governance matters. Panelists will examine recent developments in U.S. trade and investment law and policy, as well as their impact on international collaborations, corporate compliance, and mergers and acquisitions. The discussion will explore how general counsel and in-house legal teams assess and manage evolving trade-related risks within their organizations. Particular focus will be given to developments during the first two years of the second Trump Administration, including changes in tariff policy, tariff refunds, export controls, economic sanctions, and national security reviews of foreign investment. Through a discussion of regulatory trends and practical case studies, attendees will gain a deeper understanding of the legal risks and compliance obligations associated with cross-border business activities, and hear about practical strategies for advising clients and managing compliance obligations in a rapidly changing trade and investment environment. 9:45 am - 10:45 am CT Session A: The Elon Musk Cases: What Tesla and Twitter Can Teach Your Board of Directors Loren Unterseher, Managing Partner, Oxbow Industries, LLC Shulamite White, Chief Legal Officer and Head of People, Motive Technologies Kirsten Schubert, Tom Swigert, and Jonathan Van Horn, Dorsey & Whitney LLP Recent cases involving Elon Musk and his businesses have had significant impact on principles governing board of directors’ fiduciary duties and corporate processes. This panel will examine recent litigation involving Elon Musk, Tesla, and Twitter, and its effects on the law governing the duties of directors and executives, including the executive compensation and director compensation processes, conflicts that may arise when a single executive has control over multiple businesses, and the ramifications of tweets or other public statements by an executive. Session B: All Eyes on DEI: Managing Diversity Efforts Amid Regulatory Scrutiny and Potential Litigation Maggie Dalton, Senior Commercial Attorney, Cargill; Board Co-Chair, Twin Cities Diversity in Practice Laura A. Vannelli, Legal Counsel, Mayo Clinic Susan Lorenc and Jack Sullivan, Dorsey & Whitney LLP The legal and regulatory landscape surrounding diversity, equity, and inclusion (DEI) initiatives has changed dramatically over the past two years. Law firms and legal departments are continuing to grapple with how to recruit, retain, and develop talent from a wide range of personal backgrounds, in a world where previously accepted recruiting and employment practices are facing increased scrutiny and litigation. This program will provide a practical overview of the current legal regime, including recent federal enforcement actions and litigation trends associated with DEI initiatives. Panelists will discuss practical ways in which organizations can pursue and retain legal talent and increase inclusion while minimizing legal, business, and reputational risk. 11:00 am - 12:00 pm CT Session A: Governance in an Age of Increasing Unpredictability James Chosy, Senior Executive Vice President and General Counsel, U.S. Bancorp Todd Hartman, Executive Vice President and Chief Legal and Risk Officer, Best Buy Co., Inc. Alan Rosselot, Associate General Counsel & Assistant Secretary, Delta Air Lines, Inc. Cam Hoang and Robert Rosenbaum, Dorsey & Whitney LLP More than ever, ensuring that boards are well-informed and forward-thinking is critical to a company’s success. Join our panel of corporate governance experts as they share their experiences advising boards through crisis and unpredictable events; capitalizing on, but also checking, disruptive technologies; and positioning the company to succeed in an environment of shifting government priorities. Session B: A Day in the Life of a Trademark, Copyright & Advertising Attorney: A Hypothetical Case Study Alexander Kim, Vice President and General Counsel, Binks Nate Whitaker, Chief Legal Officer and General Counsel, Crumbl Cathy Dahl and Tiffany Shimada, Dorsey & Whitney LLP What issues are companies facing daily while developing rights in intellectual property, protecting those rights, and staying in compliance with myriad potential issues related to advertising, social media, relationships with influencers, and environmental or governmental claims? This panel will feature two in-house counsel who are navigating these issues, utilizing a hypothetical case study, with the support of two Dorsey attorneys helping to develop a roadmap for meeting business objectives and minimizing the risk of claims. 12:00 pm - 1:15 pm CT Keynote Address Dr. Rebecca Heiss, Stress Physiologist Dr. Rebecca Heiss is a stress physiologist, author, and sought-after speaker who helps audiences transform fear and stress into fuel for greater performance and resilience. Her research has been recognized as “transformative” by the National Science Foundation, and she is the author of two books, Springboard and Instinct. Through her Fear(less) message, Rebecca inspires audiences with practical, science-based strategies to train our brains to work for us – not against us – and navigate change and uncertainty with greater confidence.

News

Dorsey Earns 167 Rankings in 2027 Edition of Best Law Firms®