On the evening of September 18, Beijing time,The U.S. Department of Commerce has announced specific restrictions on TikTok and WeChat, including banning TikTok and WeChat from app stores in the U.S. and updates starting this Sunday (September 20), and banning WeChat in the U.S. Provide any service to transfer funds or process payments。
Are TikTok and WeChat really going to be removed by the US? Can the lawsuit filed by ByteDance against the US government prevent the implementation of the ban? What kind of legal dilemmas are Chinese companies facing in the United States, and what weapons are there to confront and defend their rights? Recently, Observer.com interviewed the lawyer Wade Weems of Kobre & Kim Law Firm. Although the interview took place before the announcement of the ban rules, the methods mentioned in the article are still valid.
Kobre & Kim Law Firm is an AmLaw200 global law firm specializing in cross-border dispute resolution and investigation cases. It is good at seeking active solutions for Chinese clients facing US and other government investigations or cross-jurisdictional disputes, and has the ability to counter large multinational technologies. The capabilities of the company. Attorney Wade Wimes has served as a U.S. Department of Justice prosecutor and has handled many U.S. government investigations for Asian corporate clients.
The following is the full text of the interview:
Observer Network:Thank you very much Mr. Wilms for accepting our interview. Our questions are mainly around the ban on TikTok and WeChat. First of all, I would like to ask, what is the legal basis for Trump’s ban on TikTok and WeChat?
Wilms:Under the legal system of the United States, Congress, as the legislature, can formulate laws related to business regulation, which are then enforced by the executive. However, in some special circumstances, Congress can transfer power to the President and his subordinate administrative agencies, and these agencies directly issue regulations for management. The case of TikTok and WeChat is an example.
Trump is based on the International Emergency Economic Powers Act (IEEPA). According to this law, after the president declares a state of emergency, he can issue corresponding regulations to control the trade and business activities of foreign governments, foreign entities, or foreign citizens. This law gives the president considerable authority and is the basis for most of the previous economic sanctions in the United States.
In 2019, President Trump issued Executive Order 13873, authorizing the Department of Commerce based on “unacceptable risks” to U.S. national security, including those based on the risk of sabotage or other “disastrous effects” on U.S. communications infrastructure. Risk to prevent any “acquisition, import, transfer, installation, transaction or use” of information and communication technology and services.
This time, President Trump issued a ban on WeChat and TikTok in accordance with IEEPA and the above-mentioned executive order, prohibiting certain transactions related to WeChat and TikTok. In addition, there is a separate ban on TikTok, which invokes the review of the U.S. Foreign Investment Review Board (CFIUS), which generally forces Bytedance to sell TikTok.
Observer Network:How will the Trump ban affect TikTok and WeChat? Are US users completely unable to use these two software?
Wilms:No one knows the exact consequences yet. If you read Trump’s two executive orders against TikTok and WeChat, his wording is rather vague and does not give a clear prohibition range. In fact, he said that the Ministry of Commerce will issue a detailed rule after 45 days, stating which behaviors should be prohibited.
Therefore, Trump’s executive order still has a lot of room for maneuverability, and the final ban may be very broad or very narrow. It includes content that may prohibit Apple or Google from providing download and installation of these two applications, or prohibit financial transactions related to them. But everything has to wait until September 20th, when the US Department of Commerce comes up with detailed rules.
Observer Network:After the Ministry of Commerce announces the detailed rules on September 20, will it take effect immediately? If there is a certain time gap between the proposal and the effective of the rules, can American companies still trade with TikTok during this period?
Wilms:The detailed rules may give a specific effective time, but any injunction is likely to be challenged in court in both procedural and substantive aspects, and it may take months or even years to resolve these disputes. The US government must also publicly prove the legality of its claims before a federal judge. If such legal procedures are in progress, whether the transaction can be conducted during this period of time depends on whether the federal court will approve the plaintiff’s request to temporarily prohibit the US government from implementing the regulations.
Observer Network:According to the latest US media reports, ByteDance has rejected Microsoft’s overall acquisition of TikTok and may only sell part of its equity to Oracle. Will this satisfy Trump’s ban?
Wilms:We still have to see that Trump’s executive order language is rather vague, which is similar to his usual practice, leaving a lot of room for himself to operate freely. Whether Oracle’s transaction can meet the requirements of the US government and whether it can persuade the Trump administration to lift the ban depends on whether he can eliminate the US government’s national security concerns.
The U.S. government’s national security concerns mainly have two aspects. First, will the personal information of American users stored on these software platforms be at risk of leakage and will it be passed on to China? Second, they believe that the content on the platform may be manipulated, and some information may be selectively deleted or enlarged, affecting American users. Whether the Oracle transaction can help lift the ban depends on whether it can solve the above two problems.
The details of the transaction between TikTok and Oracle are still unclear. According to the existing media information, TikTok is going to establish a partnership with Oracle, which is different from the complete sale to Microsoft as mentioned before. Many media said that Oracle will become a “trusted technology partner.” Can it introduce sufficient security measures, and can it completely resolve the concerns of the US government? It is difficult to give an answer now.
We only know that the U.S. Department of Commerce is assessing whether this plan will definitely be passed, and whether it can be approved by CFIUS is now difficult to judge.
Observer Network:ByteDance has sued the US federal government in the Federal District Court for the Central District of California. What specific legal provisions can be used?
Wilms:First of all, we must see that Trump’s ban is based on IEEPA. In this case, challenging the president is very difficult. Because in the field of national security, the president almost has the supreme authority.
Historically, IEEPA was generally used for the overall economic sanctions imposed by the United States on other countries, such as sanctions on Iran and North Korea. This time it is very rare to be used on TikTok and WeChat in isolation. So in the past sanctions against the country, few people challenged the president’s decision, because the president is performing national security duties. Under the US system of separation of powers, the president has high authority in the field of national security.
But this time the case is novel, and it is not exactly the same as the economic sanctions imposed on other countries in the past, and it may face two major challenges. The first category is the principle of procedural justice under the Constitution. The president and the executive branch violated some procedural rights of Bytedance. For example, regarding why they were banned, Bytedance failed to be fully informed, did not have the opportunity to explain their opinions, and failed to provide some less restrictive solutions.
The second type of challenge is freedom of speech. There are also two specific legal basis. One is the citizens’ freedom of speech protected by the First Amendment to the Constitution. TikTok is a social platform, and closing it will definitely affect users’ freedom of speech. On the other hand, the IEEPA bill itself protects the freedom of speech. The bill makes it very clear that personal communications or the transmission of informational materials is not prohibited.
IEEPA expressly stipulates that although the President can restrict foreign trade and commercial activities in accordance with this bill, it cannot be used to directly or indirectly prohibit any postal, telegraph, telephone or other personal communications, as long as these personal communications do not involve the transfer of property. The bill also expressly stipulates that the law shall not prohibit “importing information or informational materials from other countries, regardless of whether the information or materials are commercial or not, and regardless of the carrier and form of the information or materials.” Information or materials include but are not limited to publications, movies, news telegrams, etc.
Either way, there is not much precedent, because IEEPA is rarely used in such a situation.
Observer Network:If Bytedance’s prosecution fails this time, can it continue to appeal to a higher court? Will it become a protracted battle?
Wilms:Yes, according to analysis, Bytedance’s intention to file a lawsuit may be to buy time and gain more chips in the sale negotiation. You may also ask, why did ByteDance file a lawsuit, but WeChat did nothing? Part of the reason is that ByteDance is under pressure to be forced to sell by the US government, and WeChat does not have this pressure. Then under pressure, they have to buy time so that they can better bargain in the transaction.
The ByteDance lawsuit mentioned that when the US government issued a specific list of prohibited behaviors on September 20, they would apply to the court for a temporary injunction to prohibit the US government from implementing this transaction ban. We also said before that the administrative order against Bytedance is rather ambiguous. We still don’t know which transactions will be prohibited, but as soon as the rules come out, Bytedance may be in court proceedings based on its indictment. The several reasons mentioned in the article require the court to prohibit the implementation of the injunction.
Of course, there is the right of appeal in any such case. After the case is concluded, the plaintiff can appeal to the Federal Circuit Court, and even continue to appeal to the Federal Supreme Court. Although generally speaking, U.S. law requires the entire case to be closed and appealed, if there are some important court decisions that will affect the outcome of the trial during the trial, the parties can also request that the decision be directly appealed. For matters like temporary injunctions, if the court refuses to issue an injunction, ByteDance is likely to be able to do the above, or even request an urgent appeal, which greatly speeds up the appeal process.
Observer Network:As you said, it may take a long time for the US government’s ban to take effect. However, there is a view that even if the ban has not yet taken effect, US companies will tend to over-compliance and terminate cooperation with the sanctioned. Is this common? Even if they may face huge economic losses, will Apple, Google and other companies choose to remove these applications?
Wilms:Traditionally, excessive compliance does often occur in sanctions related to IEEPA. When a company is undergoing US sanctions investigation, or is subject to only minor sanctions, its US partners will also tend to stay away from these companies completely. Because these US partners worry that once they are targeted by the US government, they may be found out and punished for other problems.
But this case is slightly different. As we said earlier, the situation in which the bill was applied is different from the previous economic sanctions. On the one hand, the executive order issued by Trump is so vague, everyone is waiting for what actions will be prohibited by the detailed rules issued on September 20. On the other hand, whether it is WeChat or ByteDance, if American business partners refuse to continue to cooperate with them, the cost is very huge, which is different from those small companies that were previously sanctioned.
So after comprehensive consideration, everyone is watching at this point in time to see what content will be banned in the end, and then decide how to operate in compliance, so currently we have not seen excessive compliance behavior.
Finally, what each partner will do is very individual. Each partner may have his own ideas and decide his own action strategy based on their relationship with the company involved, the closeness of their cooperation, etc.
Observer Network:You talked about the Trump administration’s ban on TikTok and WeChat, mainly using national security-related laws. Is there a significant increase in the US government’s suppression of Chinese companies in the name of national security?
Wilms:If you look at the way the US government has dealt with China in the past few years, there is no doubt that law enforcement cases against Chinese entities, Chinese companies and Chinese citizens have increased significantly.
In the past, China-related cases were more about technology transfer, the so-called economic espionage, theft of trade secrets, etc. charged by the United States, as well as visa restrictions for Chinese students. We also found that the United States is reforming its CFIUS system and amending laws related to export control to more strictly protect American technologies and prevent their transfer to China.
The cases of TikTok and WeChat are yet another example of the above-mentioned trend, and there are also new changes. The definition of national security in the United States has been further expanded. It used to be more of a trade secret, but now it includes personal information. Compared with the past, the punishments imposed on Chinese companies have indeed become very, very large in the past three years.
Observer Network:Observers believe that there is a large force in the United States that is increasingly perceiving threats from China. Have you ever served in the US Department of Justice, do you have any personal feelings? How do they specifically affect the operation of the US government?
Wilms:Now, it is no longer a single group that sees China as a threat, but a cross-party group. The two parties have formed a joint force on this issue. Therefore, it is very difficult to fight against them. For those who want to develop friendly relations with China, now is a challenging time.
Of course, I am only a legal expert, not a political expert. It is difficult to make too many comments on political issues. However, from a legal perspective, we do see that the US government’s enforcement actions against China have greatly increased. Whether it is the US Department of Justice, the Department of Commerce, and the Department of Treasury, many law enforcement actions are carried out by various means. Congress also tends to support the executive branch’s enforcement actions through legislation or other forms.
Generally speaking, the attitude towards President Trump in the United States is very divided, and most of his executive orders are not supported by the Democratic Party. But in law enforcement actions against China, he has the joint support of both parties, so his methods can become tougher.
Observer Network:Indeed, we have seen that the US government and the US legislature are becoming increasingly tough on China. So in the operation of the US judicial system, for example, when judges deal with cases related to Chinese companies, will they also be affected by politics?
Wilms:I do not think so. The U.S. judicial and political systems are relatively isolated, and judges are rarely affected by partisan politics. As we all know, federal judges in the United States serve for life, and there are many mechanisms to protect them from excessive political influence.
However, judges do have different views on the actual legal issues involved in specific cases. For example, TikTok’s case involves many novel issues, to what extent should the protection of the First Amendment of the Constitution be, how the so-called due process of the Constitution should be defined, and the scope of the President’s powers, and how can it be considered ultra vires. On these issues, each judge may have different views, and his judgment will be based on his understanding of the above-mentioned legal issues.
In the district courts of the United States, cases are randomly assigned to each judge. Therefore, if TikTok’s case happens to be handed over to a suitable judge, it still has a chance to win the case at the right time. This opportunity is small, but it cannot be ruled out.
Some judges will think that this case, like previous economic sanctions, falls within the purview of the president. But some judges will say, no, this is different. TikTok is not an Iranian tanker company on the remote Strait of Hormuz. It has millions of American users. They exchange a lot of information on this platform. The President of the United States should at least give it some opportunities.
Therefore, the judge’s personal views on legal principles will have an impact on the outcome, although not much.
Observer Network:I think we are now talking about a deeper issue, that is, the conflict between national security and the principle of freedom of speech may have to rise to the level of the US Constitution. Will TikTok’s case evolve into a challenge to the US Constitution? Since different judges have different opinions, what is the balance of power between those who support freedom of speech and those who support national security?
Wilms:The conflict between national security and the First Amendment to the Constitution actually has a very long history. In fact, many important First Amendment cases of the Constitution were generated in the context of national security.
Several important First Amendment cases in the early days occurred during the First World War, when the United States enacted legislation for national security reasons to prohibit citizens from criticizing the government’s participation in the war. The court held that such restrictions by the government violated the First Amendment of the Constitution and overturned the legislation in the name of freedom of speech. There were similar cases in the Second World War.
The most famous First Amendment case is the New York Times case. At that time, the New York Times exposed some secret documents from the Vietnam War. Is this free speech or endangering national security? Finally, the court held that these documents can be made public. Therefore, the conflict and tension between national security and the First Amendment to the Constitution have existed for a long time.
But specific to the TikTok case, it is a little different from the past. In the cases we just talked about, the government is trying to prevent the spread of certain speech itself. In this case, the government restricts places and makes people lose a place to speak. The government did not say what you cannot say, but closed a platform for expressing opinions.
For such restrictions on places, the protection given by the US courts is relatively weak. Because you have lost this place and there are other places, it is not that there is no place to talk, so the degree of protection varies.
Of course, this case is still quite possible, as I just said, it will form a powerful challenge before a suitable judge. It involves a very large number of American users, and it is a place used by millions of people. Is closing it enough to constitute a serious violation of the First Amendment of the Constitution? It is possible.
Observer Network:Going back to the TikTok and WeChat cases, besides resorting to law, can Chinese companies have other means to defend their rights and interests in the United States?
Wilms:The biggest problem facing Bytedance now is that the time limit set by Trump for it is too tight. It wants to take more actions, and time is more difficult. But we have also seen that regardless of whether the legal proceedings brought by Bytedance are successful, they have actually achieved very good public relations effects.
A basic fact is that TikTok is a very popular APP with millions of users in the United States. Not everyone of these users is a legal expert and can think about the balance between national security and freedom of speech. They just want to support an app they like.
So, you can either apply the First Amendment to protest at the legal level, or you can start a public relations battle. For example, you can allege that Trump vented his anger at TikTok out of personal grievances or political purposes, because some Trump opponents used this software to create incidents such as empty Trump rallies. This kind of reason is not of great significance in legal procedures, but it is obviously of great public relations value.
Especially now that the US election is only more than a month away, at this time, the public relations war may be more effective than any other means. This is what other Chinese companies in similar situations can learn from.
Observer Network:In addition to the United States, are Chinese companies facing more and more national security questions in other overseas markets?
Wilms:Of course, this risk is increasing day by day. Why is this happening? The main reason is that the US government has finally discovered that if it is only unilateral sanctions without allies joining in, it is actually very inefficient. The United States adds a Chinese company or any foreign company to the list of entities. Of course, this company can no longer enter into transactions with any American company. But if it can find suppliers in Japan, South Korea, or Europe, the only result is that American companies lose a customer, which is even worse for the United States. Therefore, if the United States wants sanctions to work, it must bring allies in and jointly impose these sanctions.
The typical example is Huawei. Why does the United States have to call on everyone in the world to stop Huawei? Because if the United States does it by itself, it will be difficult to achieve results.
Therefore, whether Chinese companies or other foreign companies, they are increasingly facing national security scrutiny, mainly because the United States is wooing its allies and imposing sanctions together. It can also be seen that in addition to national security, the United States also uses the so-called “human rights” and other reasons to sanction Chinese companies, including sanctions against some individuals and entities in Hong Kong, China. After the US action, Europe has either adopted a similar approach or is considering adopting a similar approach.
So in general, in the United States’ allies, Chinese companies will face greater risks in the future.