On the day after Thanksgiving in 2020, Scott Paul got some bad news. BYD, the Chinese electric vehicle giant, was suing his organization and several of its employees in a defamation suit filed in U.S. federal court. 

BYD, Paul knew, had deep pockets. The EV giant had a market cap of $75 billion at the time, with a staff of around 224,000 employees in China alone. By contrast, his organization was the Alliance for American Manufacturing (AAM), a D.C.-based non-profit advocacy group that had a staff of around 20 and an annual budget ranging between $4.8 million and $6.5 million.

As AAM’s president, Paul was immediately concerned not just for the future of the organization, but also for the communications staffers who were named in the complaint and could be held personally liable.

“These staffers have families with young kids. I was thinking about how this would hit them as well,” Paul told The Wire China. “It caused an enormous amount of anxiety right away.”

He had good reason to be worried. BYD had hired Charles Harder, a celebrity libel lawyer who had represented Hulk Hogan in the lawsuit against Gawker Media that eventually resulted in a $140 million judgment, forcing Gawker into bankruptcy. Harder had also won First Lady Melania Trump’s defamation suit against The Daily Mail, and defended Donald Trump against defamation lawsuits filed by Stormy Daniels. 

AAM, by contrast, was hardly a big name or media heavyweight. It was formed in 2007 as a partnership between U.S. manufacturers and the United Steelworkers, the country’s largest industrial union. But AAM did have a fair amount of political sway. 

In the year before the lawsuit, it had argued that federal transit dollars shouldn’t go to entities of concern or companies that are headquartered in non-market economies — such as China. Paul was invited to give congressional testimony at a May 2019 hearing on transportation and infrastructure, where he singled out BYD and China Railroad Rolling Stock Corporation (CRRC) as “state-owned, state-subsidized, and state-supported enterprises” that have “begun securing lucrative, U.S. taxpayer-supported contracts to supply our major cities with transit rail cars and electric buses,” part of a trend that is “systematically destroying the competitive national landscape for U.S. rolling stock manufacturing.”

BYD’s lawsuit accused AAM of engaging in a “malicious, fraudulent, outrageous, and reckless campaign to damage BYD’s reputation and brand with false allegations and misleading rhetoric.” The complaint pointed to several AAM statements it claimed were defamatory, though none of them came from Paul’s testimony to Congress. One was a statement Paul had made that BYD is “simply an arm of China’s military and government,” responding to new research into the Chinese government’s extensive subsidies and other support for BYD. Another was a blog post published to AAM’s website that called BYD “a company controlled by the Chinese state.” Another AAM blog post listed BYD as among 83 companies whose supply chains were linked to Uyghur forced labor in China, citing findings in a report that had received widespread media coverage. 

In a national debate full of China critics, Paul believes that BYD was targeting AAM in particular as punishment for its successful advocacy. In December 2019, Congress enacted a ban on the use of federal transit funds to purchase rolling stock from Chinese-owned companies, which prevented BYD from winning valuable contracts in California and elsewhere. 

“It felt like retribution for the public policy work that we had done to limit BYD’s access to tax dollars,” Paul says. 

BYD did not respond to requests for comment. 

AAM isn’t alone in facing such a lawsuit. In recent years, several large Chinese companies have filed defamation suits against small organizations or individual researchers for pointing out their close ties to China’s party-state or for repeating other claims already published in major media outlets. With many of these companies facing political headwinds in European and U.S. markets, some analysts warn that the Chinese firms pursued “SLAPP” suits, a legal tactic that is intended to chill free speech through frivolous lawsuits that drain the financial resources of critics. (SLAPP stands for “strategic lawsuits against public participation.”)

Diego Zambrano, a law professor at Stanford University who specializes in transnational litigation, warns that the rise of SLAPP cases represents the ability of authoritarian governments, such as Russia, China, and Turkey, to extend repression far beyond their borders.

“In the U.S. we give immunity to foreign governments and their instrumentalities, and yet it’s quite easy for foreign governments and their proxies to file claims in U.S. courts,” Zambrano told The Wire China. Sometimes these suits are frivolous and intended to punish media outlets and political dissidents, or to pursue other state goals, Zambrano noted, adding, “I’m quite worried about this transnational repression.”

Moreover, according to experts, SLAPP cases are quite effective at silencing potential critics.

“One of the hallmarks of a SLAPP suit is that it is brought to punish and, in a sense, terrorize people or organizations that don’t have those types of resources, teach them a lesson, and deter other people from engaging in similar conduct,” says Art Spitzer, senior counsel at the American Civil Liberties Union, District of Columbia chapter.

In the U.S. we give immunity to foreign governments and their instrumentalities, and yet it’s quite easy for foreign governments and their proxies to file claims in U.S. courts.

Diego Zambrano, a law professor at Stanford University

In other words, the impact of such cases isn’t solely on the target; others may learn to tread carefully as well. AAM’s liability insurance firm, The Hartford, dropped part of AAM’s insurance in April 2021. In an email reviewed by The Wire, a representative of The Hartford wrote that the “reason for non-renewal is we have learned from a website review that your operations include criticizing Chinese manufacturers, Chinese owned U.S.-based companies and the Chinese government. Such comments may lead to allegations of defamation.” (The Hartford did not respond to requests for comment.)

Some small firms that do private sector due diligence on Chinese supply chains are so concerned about potential retribution for their work that they don’t even have websites. The strange reality, then, is that even as the general rhetoric against China has become more hawkish in recent years, some in the West have grown increasingly reluctant to publicly criticize China and top Chinese companies, as they perceive a high legal or political risk in doing so.

FORUM SHOPPING

BYD’s lawsuit against AAM dragged on for almost two years of dismissals and unsuccessful appeals. In fact, the saga only ended when the Supreme Court declined to hear BYD’s appeal in October of 2022. The courts determined that BYD failed to establish that AAM’s statements were defamatory, and noted that AAM’s statements appeared to be well-supported by the reports cited. “The Court will not accept BYD’s invitation to rewrite the law of defamation,” the presiding federal judge wrote in his decision. 

Although AAM came out on top, the organization spent nearly $400,000 in legal fees throughout the process — just under 10 percent of its annual budget. “It’s not easy to absorb that,” Paul says. 

BYD, by contrast, could afford another defamation suit at the same time. In April of 2020, Vice published an article that, like AAM’s blog post, listed BYD as among the companies recently linked to Uyghur forced labor in China. BYD filed a lawsuit in a New York district court objecting to BYD’s inclusion in the list of companies linked to forced labor, and to the Vice article’s use of the word “blacklisted” to describe the U.S. legal prohibition on using federal funds to buy BYD-made vehicles. In March 2021, the district court granted Vice’s motion to dismiss the complaint; BYD then appealed and brought it to the Supreme Court, which denied BYD’s petition for review. (Vice Media did not respond to requests for comment.)

Free speech advocates warn that winning isn’t necessarily the point for SLAPP cases, which is why they have long been such a concern. 

Beginning in the 1960s and 1970s, SLAPP cases were widely deployed by U.S. companies and other powerful organizations to combat the rising grassroots activism of the era. In one well-known early case, the San Francisco Police Officers Association sued the National Association for the Advancement of Colored People (NAACP) for defamation for a 1978 statement made by a NAACP spokesperson accusing San Francisco police officers of a “systematic, sadistic and criminal program of assaults on Black citizens.” In 1989, apple growers in Washington state sued CBS after it aired a segment about a chemical used on apples that had recently been found to cause cancer. (Courts ruled against the plaintiffs in both cases.) Environmental organizations such as Greenpeace and the Sierra Club have also been frequent targets of SLAPP suits.

In response to the rise of SLAPP suits, states began adopting anti-SLAPP statutes, which provide a mechanism for defendants to get defamation cases tossed out early in the proceedings if they can demonstrate the case is meritless. Anti-SLAPP statutes, which can vary from state to state, also typically require the plaintiff to reimburse the defendant’s legal fees. 

But protection from SLAPP suits depends on geography and on which court the case is filed in. Eighteen states still don’t have an anti-SLAPP statute and there is still no federal anti-SLAPP law, which means state-level anti-SLAPP laws do not apply to federal courts. These are some large loopholes, which have led to “forum-shopping” among plaintiffs looking to file flimsy defamation suits. 

“A plaintiff who is going to file a SLAPP suit, if his lawyer is competent, will tell him to file in federal court if at all possible,” notes Spitzer.

BYD’s lawyers, for instance, filed the suit against AAM in federal court, thus evading Washington, D.C.’s anti-SLAPP statute and ensuring AAM wouldn’t be able to get the case tossed out earlier or get its legal fees reimbursed. 

SLAPP cases are also not just a problem in the United States. In 2016, China Energy Fund Committee, a think tank affiliated with CEFC China Energy, a now-defunct Chinese energy conglomerate with close ties to the party-state, sued J. Michael Cole, a Taiwan-based Canadian analyst, in Taiwan’s court system. (Around the same time, CEFC also threatened lawsuits against researchers in the U.S., Australia and the Czech Republic.) 

Cole had written an article that was published in The National Interest, a U.S. magazine, about CEFC China Energy’s founder, the company’s funding sources, and its think tank. The 2015 article was among the earliest to scrutinize CEFC China Energy, which had started buying up assets around the world. 

After two years of legal proceedings, the Taipei district court dismissed the case against Cole. And shortly afterwards, it became clear that he had been on to something: In 2018, CEFC China Energy’s founder was detained in China; the think tank’s director was convicted of bribery by a U.S. federal court and jailed; and a Shanghai government agency took control of the company. 

Cole declined to comment for this story. 

Huawei has also used the legal system to target individual researchers. In 2019, the telecom giant filed a defamation complaint in France against a researcher, Valerie Niquet, who had appeared on a French TV news program and said that Huawei “is directly under the control of the state and the Chinese Communist Party.” At the time, the French government was in negotiations with Huawei regarding potential access to France’s 5G infrastructure.

In 2020, the French government announced a de facto ban on Huawei. It took another two years before Huawei withdrew the suit against Niquet. (Niquet declined to comment for this story.)

USING VS. ABUSING THE SYSTEM

Like Huawei, most Chinese companies have found themselves in increasingly hostile environments. Indeed, Antonia Hmaidi, a senior analyst at the Berlin-based Mercator Institute for China Studies who focuses on the geopolitics of technology, says that, taken together, “the lawsuits and threats of lawsuits have not been effective in tamping down public critics” of Chinese companies. 

But the SLAPP loopholes in the U.S. still exist, and Hmaidi notes that it’s difficult to prove a negative: “We are unlikely to realize if fear of a lawsuit has caused a researcher not to publish specific findings,” she says.

There have been some efforts, so far unsuccessful, to close the SLAPP loopholes in the United States. In September 2022, U.S. Representative Jamie Raskin (D—Md) introduced a bill that would create a federal anti-SLAPP statute, which would apply to federal courts. But the bill was never brought to a vote. 

In May of last year, the U.S.-China Economic and Security Review Commission held a hearing entitled “Rule by Law: China’s Increasingly Global Legal Reach.” During the six-hour hearing, Zambrano, the Stanford professor, called for the adoption of what he terms a “foreign sovereign anti-SLAPP law.” 

Modeled on anti-SLAPP laws, his proposal would make it possible for the target of a politically motivated lawsuit brought by an authoritarian foreign government or its proxy, such as a state-linked company, to quickly have the charges dismissed. Zambrano’s proposal would apply to defamation suits, breach of contract claims, and other civil claims that have commonly been used by foreign governments or their proxies to pressure political targets in the United States.

Combatting the “chilling effect” of SLAPP suits, he said during the hearing, was critical since “even one successful claim tells any political opponent in the U.S., you are not out of our reach. We can still get you by filing these claims in U.S. courts.”

After the hearing, Zambrano says, several members of Congress asked him to put together a draft of a potential law, a project he is currently working on. 

Chinese companies can really leverage the U.S. legal system for their interests in a way that U.S. companies can’t in China. Huawei, BYD and others can use and even abuse the system, and there’s not much the system can do about it.

Julian Ku, a law professor at Hofstra University

In the current climate, Zambrano says his proposal is a more pragmatic solution than a federal anti-SLAPP statute. “A federal anti-SLAPP statute would cover anyone, foreign or domestic,” he says. “But there’s little appetite for that. My proposal is much narrower; it’s about foreign governments and their proxies.”

A foreign sovereign anti-SLAPP law would apply to cases in which there is a clear effort to punish someone for their political speech or activities. Once invoked, it would shift the burden onto the plaintiff, who would either need to prove that they have actual evidence of defamation or that they aren’t a foreign government proxy. 

In the case of China, that could be tricky. “Because of the nature of how companies operate in China, there may be too many companies that fall under a broad definition of proxy,” he says. 

Still, he believes that his proposal is written carefully enough to avoid miscarriage of justice. “The worst that can happen under my proposal is that you would have to pony up more evidence earlier in the process,” he says.

The risk, however, is in overcorrecting. Indeed, Julian Ku, a law professor at Hofstra University who researches international and constitutional law, notes that there can be legitimate reasons for Chinese companies to use the U.S. legal system to defend their interests — a fact that Ku notes is “a testament” to the U.S. system.” 

“There are not a lot of pockets of support for Chinese companies in the political system,” he says. “That’s why the court system is a better place for them. They can get the best lawyers in America, and the courts may be a last refuge for Chinese companies.”

When the U.S. government was imposing new restrictions on Huawei, for instance, Huawei fought back against what it deemed unfair treatment. The company sued the U.S. Federal Communications Commission for banning U.S. carriers from using federal subsidies to buy Huawei equipment, arguing that the FCC had provided no evidence to back its claim that Huawei posed a national security risk. (A federal appeals court later upheld the ban.) Huawei also sued the U.S. government in federal court for a separate ban on U.S. federal agencies using Huawei equipment, arguing that the ban was unconstitutional. A federal judge in Texas dismissed that case in 2020. 

These were not SLAPP suits, and represent a business using the legal system in a standard way to defend its interests. But experts warn that targeting individual researchers, nonprofits or media outlets is something else. 

“Chinese companies can really leverage the U.S. legal system for their interests in a way that U.S. companies can’t in China,” says Ku. “Huawei, BYD and others can use and even abuse the system, and there’s not much the system can do about it.”

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