Alibaba has launched a legal battle against the U.S. Department of Defense. According to Bloomberg, on June 23, Alibaba Group Holding Ltd. filed a lawsuit in the U.S. District Court for the Northern District of California in San Jose, demanding removal from the 1260H military blacklist, which labels companies as allegedly affiliated with China's People's Liberation Army.
The complaint argues that the Pentagon listed Alibaba without providing substantive evidence or explanation, violating constitutional due process and free speech rights. Alibaba said it had been in communication with the Defense Department since February, after the Pentagon briefly published a version of the blacklist and then removed it minutes later. The company submitted detailed rebuttal evidence and responded to questions, but the Defense Department never replied.
What Is the 1260H List and What Are the Consequences?
The 1260H list, derived from Section 1260H of the National Defense Authorization Act for Fiscal Year 2021, is updated annually by the Pentagon to identify companies deemed to support the Chinese military. The latest update on June 8, 2026, included 188 Chinese firms, up from 134 last year — the largest expansion in five years. New entries included Alibaba, Baidu, BYD, CXMT, YMTC, and robotics firm Unitree Robotics. Tencent had already been added last year.
Direct consequences take effect from June 30, 2026, when the Pentagon will ban direct contracts with listed companies. From June 2027, indirect procurement through third parties will also be banned. Additionally, under the FY2025 NDAA, any organization lobbying for listed companies will be barred from Pentagon contracts starting June 30. Alibaba's suit states the designation has forced it to part ways with long-standing lobbyists, lawyers, and advocates.
While no immediate legal penalties are attached, the list is increasingly used to restrict military procurement eligibility and research funding, and is widely seen as a red flag signaling stricter trade sanctions.
Alibaba's Legal Strategy: Procedural Unconstitutionality
Alibaba’s lawsuit focuses on procedural flaws: the company learned of its designation only by reading the Federal Register, denying it proper notice or opportunity to respond. The company argues this fails to meet constitutional due process minimums. Alibaba’s transformation into an AI powerhouse — its Qwen large language model ranks among China’s top — may have heightened the Pentagon’s suspicion of military-civil fusion.
Precedents and Potential Follow-Ups
Alibaba is not the first company to sue. Advanced Micro-Fabrication Equipment (AMEC) and Xiaomi successfully sued to get removed from the 1260H list. WuXi AppTec filed a lawsuit on June 11–12. Both Baidu and BYD have denied military ties and hinted at legal action: Baidu said it would “use all available options,” while BYD vowed to “defend its rights through all feasible administrative and legal means.” If multiple companies sue simultaneously, it could pose a significant challenge to the Pentagon’s list mechanism.
The Pentagon has not yet publicly responded to the lawsuit.