Benzinga | Mar 13, 2021 01:04PM EST

Xiaomi Wins Court Ruling Over U.S. Government Investment Restrictions

A U.S. federal judge blocked the government from restricting U.S. investment in Chinese electronics manufacturer Xiaomi.

What Happened: Judge Rudolph Contreras temporarily blocked the Department of Defense from imposing restrictions on U.S. investment in the Xiaomi Corp (OTC:XIACF) (OTC:XIACY), the Wall Street Journal has reported.

In the lawsuit, Xiaomi had argued that the ban on investing in the firm was "arbitrary and capricious," and that it deprived the company of its due process rights.

In his verdict, the judge said that "Xiaomi is a publicly-traded company that produces commercial products for civilian use, is controlled by its independent board and controlling shareholders, and is not effectively controlled or associated with others under the ownership or control of the PRC or its security services."

Why It Matters: Xiaomi was blacklisted from getting U.S. investments over allegations of having connections with the Chinese military.

It is believed that the blacklist was imposed after Xiaomi's founder and CEO, Lei Jun, was awarded the "Outstanding Builder of Socialism with Chinese Characteristics" in 2019 from China's Ministry of Industry and Information Technology (MIIT).

According to the Defense Department, the MIIT assisted China's policy of civil-military fusion, and Beijing depended on MIIT to boost military technology development.

Earlier, the Defense Department had alleged that Xiaomi's plans to invest $7.7 billion into 5G and artificial intelligence were of key interest to the People's Republic of China's military-civil fusion strategy.

To this point, the judge said, "investment in the technology didn't necessarily suggest a military link."