DC Circuit Grants Due Process Rights to DoD-Designated Chinese Military Companies
The D.C. Circuit held for the first time that companies designated by the Department of Defense as Chinese military companies under Section 1260H are entitled to Fifth Amendment due process protections before the listing becomes final.
In a case of first impression, the U.S. Court of Appeals for the D.C. Circuit unanimously reversed a district court decision, holding that the Department of Defense must provide due process to companies it intends to list as Chinese military companies under Section 1260H of the National Defense Authorization Act. The ruling is the first appellate decision to find that companies are entitled to Fifth Amendment protections before such a designation becomes final. The decision establishes an important new precedent at the intersection of national security, constitutional rights, and administrative law. For sophisticated clients, particularly those in the technology sector or with operations in China, the ruling provides a critical procedural safeguard. A designation carries significant reputational and commercial risk, and this decision creates a new avenue to challenge a listing before it takes effect. Counsel for companies potentially subject to Section 1260H should evaluate this precedent to prepare challenges. The DoD will likely need to establish new procedures providing notice and an opportunity to be heard.