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`21CV375169
`Santa Clara — Civil
`
`NORTH RIVER LAW PLLC
`Times Wang (State Bar No. 281077)
`twang@northriverlaw.com
`1300 I Street NW, Suite 400E
`Washington, DC 20005
`Tel: (202) 838-6489
`
`SCHONBRUN SEPLOW HARRIS HOFFMAN &
`ZELDES LLP
`Paul L. Hoffman (State Bar No. 71244)
`hoffpaul@aol.com
`200 Pier Avenue, #226
`Hermosa Beach, CA 90245
`Tel: (310) 396-0731
`
`Counselfor Plaintiffs and the proposed Class
`(Additional counsellisted on signature page)
`
`Electronically Filed
`by Superior Court of CA,
`County of Santa Clara,
`on 12/1/2021 1:39 PM
`Reviewed By: R. Walker
`Case #21CV375169
`Envelope: 7766868
`
`SUPERIOR COURT FOR THE STATE OF CALIFORNIA
`
`COUNTY OF SANTA CLARA
`
`Citizen PowerInitiatives for China, and Doe
`Plaintiffs 1-6, the latter individually and on
`behalf of all others similarly situated,
`
`Plaintiffs,
`
`Vv.
`
`Tencent America LLC and Tencent
`International Service Pte. Ltd.,
`
`Defendants.
`
` Case No. 21CV375169
`
`PLAINTIFFS’ OPPOSITION TO
`TENCENT’S SECOND PETITION TO
`COMPEL ARBITRATION
`
`Hon. Patricia M. Lucas
`Department3
`
`Complaint Filed:
`Hearing Date:
`Trial Date:
`
`January 8, 2021
`January 12, 2022
`Notset
`
`PLAINTIFFS’ OPPOSITION TO TENCENT’S SECOND PETITION TO COMPEL ARBITRATION
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`TABLE OF CONTENTS
`
`Table of Contents... eccceeccceeeeeceseeseeceeneceeeeceeeeeeeesneeauesecesseeecaaeesnesseceseesesaeseeeeseeeeeaaeeeeeseeeesuasenresees 1
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`Table of Authorities occ ecceeeccssececsnecesetenecseesaeeeeeceseceseseeecaaeeaecneesaesaeseeseaecaaseaeenseeaeenseseesnaesease ii
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`I.
`
`II.
`
`TntroGuction ........c.ccceccceecececceeeceeeececeeeeeeesaeeceaeeceseaeeceaeeaeseaeecaeseaaeeaeeseaeesaaeseeeseaeesueeeeesnaeeeaes 1
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`Factual and procedural background ............:.cccccccssscecsscceesseceeseeeecseeeeceeeeccneeeceneeesenressenressenees 3
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`A.
`
`B.
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`C,
`
`D.
`
`E.
`
`F.
`
`G.
`
`The complaint alleges, among other things, that Tencent routinely turns
`over massive amounts of private WeChat user data to the Party-state. ............. 3
`
`Tencent petitions to compel arbitration before the American Arbitration
`ASSOCIAtIONL. 00... eecceeeeeeeeeeeeeeeeeceaeeeeeeeseeecaeeeneeseeecaseesaeseeeecenecsaeseeeeseeeseseeeeesseeesuseesaeeees 4
`
`The political and legal environment in Hong Kongturnsagainstcivil society,
`and independent institutions come under previously unknown political
`pressure from the Party-state. .........cccccceeccceeeeceseceeeceeeeeeaeceaeeeeeeseaeesaeeeeaesnaeesneeeeaeeaes 4
`
`Hong Kong’s credibility as a forum for international arbitration is called
`INCO SCTIOUS QUESTION.
`.......ccccccsccssseccsssecesseecsseeenaeeeseeesseeeesaeesesaneeecsaeecusaeecssaeeeaaes 5
`
`Tencent issues new terms of service replacing Hong Kongarbitration with
`Singapore arbitration............cccccccceceseeeeeececeeeeeeceeeeceeeeaeceaeeceeeeeaeseaeeseeeeeeeeeeeseaeesanens 6
`
`issues both a travel advisory and a business
`The federal government
`advisory warning of the heightenedrisks of traveling to and doing business
`IN HONG KON... eccescccssecesseseeceseeecseeeseecsueecsesseeceneeeeseeeesenecseseeeeseeessueseeeseaeesenes 6
`
`The Cheung Declaration confirms the deterioration of Hong Kong’s
`political and legal environMent............ceccesesscestecenecssseeseeseeccsseeceessseecsseseeseeeeenes 7
`
`Il.
`
`ATQUMENE oe. eceeeeecee cence ence eeeaeeceaeeceaeeseeaeeeesaeaeeeeseeaeeeseaeeeeaeeessaeeesnaeeesnaeesenaeeceeesecueeseeeeas 8
`
`A.
`
`B.
`
`Arbitrating any aspect of this action in Hong Kong would deprive Plaintiffs
`of a fair hearing in contravention of fundamental U.S. policy.............ceeeeeeeee 8
`
`It would contravene U.S. law and policy to compel arbitration of claims
`requiring the determination and application of California public policy.............. 11
`
`TV.
`
`COMCTUSION 0a. eee eee eeeeeeeeeeeeeeeeeceneeceneecaeesaceseneceaeecenesaeecaeeseneeeaceseneecaeesaeeseneeeenesieeseasesseesees 12
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`PLAINTIFFS’ OPPOSITION TO TENCENT’S SECOND PETITION TO COMPEL ARBITRATION
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`i
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`Cases
`
`TABLE OF AUTHORITIES
`
`Ajamian v. CantorCO2e, L.P. (2013) 203 CalApp.4th 771 oo... cccccccsssecsteessesessecsnecsssesseesseecssseseeesseneeaes 11
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`Caperton v. A.T. Massey Coal Co. (2009) 556 U.S. 868 .....cccccccccccsssscssseccsseeecsaeeceseeessneeesseeseseeensneeeeeees 1,8
`
`Consol. R. Corp. v. Nat. R.R. Passenger Corp. (D.D.C. 1987) 657 F. Supp. 405.00... cessccesreeseteees 1,11
`
`Flextronics International USA, Inc. v. Murata Manufacturing Co. (N.D.Cal., Aug. 31, 2020)
`2020 WL S1O685 1 oi... ceecececcccceececeeeeeeescecsecenecaeesaecaeeeecsneecesenecsasenecaeesaeseresaeseneseesenseeaeeareesesaneseeees 10
`
`G.B. Goldman v. United Paperworkers (E.D. Pa. 1997) 957 F. Supp. 607.......c:ccssccssssecesseccssecsssrecsssreees 1
`
`Mitsubishi Motors v. Soler Chrysler-Plymouth (1985) 473 U.S. O14 woececcceccceseeeseeseeeeeeeeneeeseeteneeees 1, 8, 12
`
`Oriental Commercial and Shipping v. Rosseel (S.D.N.Y. 1985) 609 F. Supp. 75 ........:ccecceceteeeetteeeenes 1,8
`
`Pak v. EoCell, Inc. (N.D.Cal., Oct. 28, 2020, No. 20-CV-05791-VC) 2020 WL 6318725 oo. eeeeeeeeee 10
`
`R.R. Comm'n v. Pacific Gas Co. (1938) 302 U.S. 388 ...cccceccccecccscetceceeeeceeecececeneceeesaaeesaeseaeeseeeeseesneeees 1,8
`
`Rhone Mediterranee Compagnia v. Lauro (3d Cir. 1983) 712 F.2d 50 oo. ccecccccececseceeeseeeeeseeessneeesneees 1,8
`
`State Bank of Ohio v. Knoop (1853) 57 U.S. 369 .cccccccccssscccssecssscsseecsneessessseessnecsaseceeseeeeseeseeeseaeeseneseseseas 1
`
`State v. Am. Fed’n ofState, Cnty. & Mun. Emps., Council 31 (Il. 2016) 51 N.E.3d 738.00... cee 12
`
`Turner v. Wade (1920) 254 U.S. 64.0... ceccccecscccesseeceeecseeeeecnecsceeeseneesseneessseeeseneesseeeeseeeeeseeeessneessennesseaeeess 1,8
`
`U.S. WeChat Users Alliance, et al., v. Donald J. Trump, et al. (N.D. Cal. Sep. 19, 2019) No. 20-
`CV-OS91O-LB oo o.eeccecceccceceeseeeeceseeeeececesaecsnecaeesneceeesaessneceesenscseesaeeeeesaeeceeseseeesaesaseeseeaeeseesaeeeaesenseeeeeaes 3
`
`W.R. Grace Co. v. Rubber Workers (1983) 461 U.S. 757 v.ccccccccssscsssssesecessseeesseeessneeessaeecsseeecsaeecssaaeseatess 1
`
`PLAINTIFFS’ OPPOSITION TO TENCENT’S SECOND PETITION TO COMPEL ARBITRATION
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`L
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`INTRODUCTION
`
`Tencent concedes that this Court should not compel arbitration in Hong Kong if it would
`
`contravene a fundamental policy of the United States. (Tencent’s Second Petition to Compel Arbitration
`
`(“2nd Pet.”) at p. 18; Rhone Mediterranee Compagnia v. Lauro (3d Cir. 1983) 712 F.2d 50, 53 [“an
`
`agreementto arbitrate is ‘null and void’ .
`
`.
`
`. when it contravenes fundamentalpolicies of the forum state”’];
`
`Oriental Commercial and Shipping v. Rosseel (S.D.N.Y. 1985) 609 F. Supp. 75, 78 [“Under the
`
`Convention, an agreementto arbitrate is ‘null and void’... when it contravenes fundamental policies of
`
`the forum nation.”].)
`
`Meanwhile, it cannot reasonably be disputed that a fundamental policy of the United States is that
`
`litigants are afforded fair hearings, includingin the arbitration context. (Caperton v. A.T. Massey Coal Co.
`
`(2009) 556 U.S. 868, 876 [“It is axiomatic that a fair trial in a fair tribunal is a basic requirement of due
`
`process.”] [cleaned up]; R.R. Comm’n v. Pacific Gas Co. (1938) 302 U.S. 388, 393 [“The right to a fair
`
`and open hearing is one of the rudiments offair play assured to every litigant by the Federal Constitution
`
`as a minimal requirement.”’]; Turner v. Wade (1920) 254 U.S. 64, 70 [rejecting arbitration process because
`
`it “denies to the complaining taxpayer due process of law’]; cf Mitsubishi Motors v. Soler Chrysler-
`
`Plymouth (1985) 473 U.S. 614, 634, 637 [implicitly recognizing that an international arbitration should
`
`only be compelled if it satisfies due process via the retention of “competent, conscientious, and impartial
`
`arbitrators,” and if “the prospective litigant effectively may vindicate its statutory cause of action in the
`
`arbitral forum”’].)
`
`Norcan it be disputed that another fundamental policy of the United States is that its own laws be
`
`followed. (State Bank of Ohio v. Knoop (1853) 57 U.S. 369, 392 [“Our prosperity, individually and
`
`nationally, depends upon a close adherence to the settled rules of law, and especially to the great
`
`fundamental law of the Union.”].) In the arbitration context, that includes federal law providingthat, as
`
`between courts and private arbitrators, public policy questions must be decided by the former. (W.R. Grace
`
`Co. v. Rubber Workers (1983) 461 U.S. 757, 766 [a “question of public policy is ultimately one for
`
`resolution by the courts.”]; G.B. Goldman v. United Paperworkers (E.D. Pa. 1997) 957 F. Supp. 607, 617
`
`[“Questions of public policy must ultimately be resolved by the courts, not the arbitrators.”]; Consol. R.
`
`Corp. v. Nat. R.R. Passenger Corp. (D.D.C. 1987) 657 F. Supp. 405, 408 [declining to compelarbitration
`
`PLAINTIFFS’ OPPOSITION TO TENCENT’S SECOND PETITION TO COMPEL ARBITRATION
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`because “[t]he Supreme Court has expressly held that public policy is not a proper subject for arbitrators’’].)
`
`Here, compelling arbitration in Hong Kong would contravene both of these fundamental policies.
`
`First, the idea that Plaintiffs could get a fair hearing of their allegations in Hong Kong, given
`
`recent developments there, does not pass the smell test. As discussed in more detail below, and as
`
`explained by Dr. Alvin Y.H. Cheung, a legal academic from Hong Kong with deep knowledgeof that
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`jurisdiction, the Chinese Communist Party-led (“CCP”) People’s Republic of China (“PRC,” and together
`
`with the CCP, the “Party-state”) has conducted a veritable takeover of Hong Kong’s political and legal
`
`environment in recent years—and especially after it unilaterally imposed the Hong Kong National
`
`Security Law (“NSL”)' on Hong Kongin June 2020.
`
`Asfor Plaintiffs’ allegations, they include, for example, that Tencent has been routing the private
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`data of WeChat users in California—including message content and metadata such as GPS location—to
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`the Party-state’s security organs. (| 78-83.”) Needless to say—and as confirmed by Dr. Cheung—such
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`allegationsare likely to draw the negative attention of the Party-state. And given the Party-state’s influence
`
`in Hong Kong,the notion that any institution based in Hong Kongcan credibly, or even safely, oversee
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`the investigation and adjudication of such allegationsis far-fetched. This is particularly true following the
`
`NSL,whichis so broad that the very making of these allegations, or assisting in uncovering evidence of
`
`them, might be construedas a violation of the NSL. As such,it is no understatementto say that the personal
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`safety of Plaintiffs, their lawyers, and even of an arbitrator willing to rule in their favor, would be placed
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`at risk if this case were arbitrated in Hong Kong. The possibility of a fair hearing of this particular case
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`before any Hong Kong-basedinstitution is therefore unlikely. That, in turn, compels denial of Tencent’s
`
`petition.
`
`Second, it would be unlawful and a violation of U.S. policy for a private foreign arbitrator to
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`adjudicate Plaintiffs’ public policy claims. Plaintiffs’ complaint squarely makes public policy claims(as
`
`distinct from public policy arguments). For example, the complaint includes a claim thatit violates public
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`policy for Tencent to employ termsof service (“TOS”) requiring certain would-be users physically located
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`' The full name of the law is the “Law of the People’s Republic of China on Safeguarding National
`Security in the Hong Kong Special Administrative Region.”
`* Citations to “]__” are to paragraphsin the complaint.
`2
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`in California to adhere to the “basic principles established by the [PRC] Constitution,” including the
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`principle prohibiting “any organization or individual” from “damag[ing]” the PRC’s “socialist system,”
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`the “defining feature” of which is “[I]eadership by the Communist Party of China.” (See § 165; cf Ex. 1°
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`[PRC Constitution].)
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`Federal law is clear that, regardless of their merits, these public policy claims must be adjudicated
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`by a court,as distinct from an arbitrator. Thus, it would be unlawful for these claims to be adjudicated by
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`any arbitrator, muchless a foreign one. And it goes without saying that an unlawful arbitration is also one
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`that contravenes fundamental federal policy, so Tencent’s petition should be denied for this reason as well.
`
`I.
`
`FACTUAL AND PROCEDURAL BACKGROUND
`
`A.
`
`The complaint alleges, among other things, that Tencent routinely turns over massive
`amounts of private WeChat user data to the Party-state.
`
`WeChat is an irreplaceable communications platform for Chinese-speaking people, including in
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`California. (ff 23-32.)* This action, which was filed on January 8, 2021, challenges an interlocking set of
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`oppressive practices and enabling contractual provisions employed by Tencent in operating WeChat.
`
`One of the most egregious such alleged practices is the PRC Data-Routing Scheme, whereby
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`WeChatallegedly turns over the private data of its users, en masse, to the PRC government’s security
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`organs. As an internet security expert discovered, on a single day in 2019, Tencent/WeChat routed 4.5
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`million WeChat messages from U.S. users, including California users, as well as related metadata, such
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`as user information and GPSlocation data, to police stations in the PRC. (ff 78-83.)°
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`The complaint alleges that the PRC Data-Routing Scheme, among other things, violates users’
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`right to privacy under the California Constitution; constitutes the torts of intrusion upon seclusion,
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`3 Citations to “Ex. _” are to exhibits to the concurrently filed Declaration of Times Wang.
`* A federal court recently found that “WeChatis irreplaceable for its users in the U.S., particularly in the
`Chinese-speaking and Chinese-American community.” ({ 32 [quoting U.S. WeChat Users Alliance, et al.,
`v. Donald J. Trump, et al. (N.D. Cal. Sep. 19, 2020) No. 20-cv-05910-LB, Dkt. 59 at p. 5].)
`> The other practices are the blocking, suspending, or deleting of the accounts of California WeChat users
`for discussing topics deemedpolitically unacceptable to the Party-state; Tencent’s profiting from the use
`of California WeChat user data to improve Tencent’s censorship and surveillance algorithms; Tencent’s
`prohibiting such users from withdrawing funds if they do not have an account with a PRC financial
`institution subject to monitoring by the Party-state; and the politically motivated censorship and
`surveillanceitself. (f§] 33-35, 44-72, 67, 76-77, 147.)
`3
`PLAINTIFFS’ OPPOSITION TO TENCENT’S SECOND PETITION TO COMPEL ARBITRATION
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`negligence, and intentionalinfliction of emotional distress; contravenes the Unfair Competition Law,Cal.
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`Bus. Prof. Code §§ 17200, et seq.; and violates the California Invasion of Privacy Act, Cal. Penal Code
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`§§ 630, et seq.
`
`B.
`
`Tencent petitions to compel arbitration before the American Arbitration Association.
`
`On May 19, 2021, Tencent petitioned to compel arbitration before the American Arbitration
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`Association (“AAA”) (“1st Pet.”’). In a footnote in its moving papers, it mentioned the possibility of trying
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`to compel arbitration in Hong Kongif its AAA petition were denied. (1st Pet. at p. 21 n.6.) Then, during
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`the briefing and argument process, Tencent did ask for arbitration in Hong Kong,but because Plaintiffs
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`were not given a chance to meet that request head on, the Court declined to considerit.
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`On September 30, 2021, this Court denied Tencent’s AAA petition. Tencent now squarely asks
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`for arbitration in Hong Kong, before the HKIAC.
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`The problem is that even if the HKIAC once would have been an appropriate forum forthis case,
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`Hong Kong has experienced such dramatic social, political, and legal changes in recent years that it defies
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`reason to think that it would be appropriate to send this case to Hong Kongtoday.
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`C.
`
`The political and legal environment in Hong Kong turns against civil society, and
`independentinstitutions come under previously unknownpolitical pressure from the
`Party-state.
`
`Hong Kongonce had the unique distinction of being a city that, while part of the PRC, enjoyed a
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`high degree of autonomy from the Party-state. One way that autonomy manifested wasin the existence of
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`a vibrant and independentcivil society willing and able to engage in activities the Party-state would have
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`preferred to suppress (and did suppress elsewhere in the PRC).
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`As just one example, for thirty-odd years, Hong Kongers held large annual vigils on June 4 to
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`honor those who were killed by the Party-state during the 1989 pro-democracy movement. (Ex. 2 [“12
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`Hong Kongactivists given prison sentences over June 3 vigil,” Nikkei Asia, 09/15/21].) The vigils were
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`mainly organized by the Hong Kong Alliance for Patriotic Democratic Movements of China (“Alliance”),
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`which also ran a museum dedicated to June 4. Ud.)
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`That Hong Kong, however, is no more. A large part of the reason is that in 2020, the Party-state
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`imposed a draconian law, the NSL, on the erstwhile autonomousterritory. And in 2021, under the guise
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`of the NSL, authorities took a series of actions that culminated in the shuttering of the Alliance. These
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`PLAINTIFFS’ OPPOSITION TO TENCENT’S SECOND PETITION TO COMPEL ARBITRATION
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`actions included accusing the Alliance of being an agent of foreign powers (Ex. 3 [“Hong Kong police
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`arrest 4 membersof group behind Tiananmenvigil,” Reuters, 09/08/21 article]); raiding the museum, (Ex.
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`4 [“Hong Kong police raid Tiananmen memorial museum,” Nikkei Asia, 09/10/21]); freezing the
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`Alliance’s assets (Ex. 5 [“Hong Kongnational security police freeze HK$2.2 million worth of assets from
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`Tiananmen Massacre vigil group, as leaders charged,” Hong Kong Free Press, 09/10/21]); and arresting
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`and sentencing several Alliance membersto prison, including prominentcivil rights lawyers. (Ex. 2.)
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`Andthis is just one example. Other civil society organizations have ceased operating undersimilar
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`pressure, including Hong Kong’s largest independent union and a prominent newspaper. (Ex. 6 [Largest
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`Hong Kongteachers’ union disbands amid government crackdown,” CNBC,08/10/21]; see also Cheung
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`Decl. | 40 & Exhibit N thereto.) Meanwhile, more than a hundred individuals have been arrested under
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`the NSL (Ex.7 [“In one year, Hong Kongarrests 117 people under new security law,” Reuters, 06/29/21]),
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`while tens of thousands of others have left the territory to escape the deteriorating social, political, and
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`legal environment. (Ex.8 [““This Drop Came So Quickly’: Shrinking Schools Add to Hong Kong Exodus,”
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`New York Times, 10/11/21].)
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`D.
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`Hong Kong’s credibility as a forum for international arbitration is called into serious
`question.
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`The deteriorating social, political, and legal environment has also called into serious question the
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`credibility of Hong Kong’s arbitration system—including the HKIAC. Indeed, as the Financial Times
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`reported in January 2021, international law firms in Hong Kongreported a “a surge in queries from clients,
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`mostly headquartered in the US and Japan, about whether to write Hong Kong out of governing law
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`arbitration clauses[.]” (Ex. 9 [“Companies consider writing Hong Kong out of legal contracts,” Financial
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`Times, 01/30/21].) The managing partner of one firm noted that such inquiries had “never occurred before
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`in my time[,]” and that “clients who never used to care about arbitration clauses” were now asking the
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`“question of‘is it safe to leave Hong Kongastheseat [of arbitration]?”” U/d.)
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`These inquiries were prompted by the developments described above. As the Financial Times
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`summarized, “Hong Kong’s legal system and judiciary have been under pressure since Beijing tightened
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`control overthe territory by imposing a national security law last year to crack down on anti-government
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`protests. Arrests of pro-democracy campaigners, opposition politicians and journalists have led to
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`questions over whether Hong Kong’s legal system may be compromised.” (/d.)°
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`E.
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`Tencent issues new termsof service replacing Hong Kongarbitration with Singapore
`arbitration.
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`Evidently, Tencent itself recognized that the credibility of Hong Kong’s arbitration system has
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`declined. In August 2021, Tencent issued new terms of service for WeChat. Every version up until then
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`had provided for arbitration in Hong Kong before the HKIAC. Now,for the first time, that provision was
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`eliminated. It was replaced by a provision calling for arbitration in Singapore, before the Singapore
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`International Arbitration Centre. (Ex. 10 [WeChat TOS, 08/19/21].)
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`F.
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`The federal governmentissues both a travel advisory and a business advisory warning
`of the heightenedrisks of traveling to and doing business in Hong Kong.
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`Meanwhile, in June and July 2021, the federal governmentissued two separate advisories warming
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`of the heightenedrisks of traveling to, and doing business in Hong Kong. In a June 16, 2021 advisory, the
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`State Department warned would-be travelers to “[r]econsider travel to the PRC’s Hong Kong Special
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`Administrative Region (SAR) due to ... arbitrary enforcement of local laws[.]” (Ex. 11 [Hong Kong
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`Travel Advisory, 06/16/21.) With respect to the NSL in particular, the State Department warned:
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`Since the imposition of the National Security Law on June 30, 2020, the PRC unilaterally
`and arbitrarily exercises police and security power in Hong Kong. The PRC has
`demonstrated an intentionto use this authority to target a broad rangeofactivities it defines
`as acts of secession, subversion, terrorism, and collusion with foreign entities. The National
`Security Law also covers offenses committed by non-Hong Kong residents or
`organizations outside of Hong Kong, which could subject U.S. citizens who have been
`publicly critical of the PRC to a heightened risk of arrest, detention, expulsion, or
`prosecution. PRC security forces, including the new Office for Safeguarding National
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`® The article was poorly receivedby officials and practitioners in Hong Kong, who defended Hong Kong’s
`arbitration system, largely on the ground that Hong Kongarbitral forumshad a special relationship with
`mainland China in that Hong Kongarbitrations were the only arbitrations outside ofmainland China where
`the parties could obtain provisional asset protection remedies in the mainland. (Ex. 14 [“FT Article on
`Hong Kong Arbitration Raises Hackles in City,” Asian Legal Business, 03/16/21].) The Hong Kong
`Secretary of Justice Theresa Cheng even wrote to the Financial Times to specifically tout the HKIAC, as
`well as “Hong Kong’s advantages in matters related to doing business in China.” (Ex. 15 [“Letter: Hong
`Kong’s role as a hub for arbitration is growing,” Financial Times, 02/09/21].)
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`These defenses, of course, only underscore the surpassing importance to Hong Kong officials and
`institutions of staying in the Party-state’s good graces. And whatever they say about the propriety of
`arbitrating run-of-the-mill commercial cases before the HKIAC, they eviscerate the notion that the
`HKIACcancredibly oversee the adjudication of this case.
`6
`PLAINTIFFS’ OPPOSITION TO TENCENT’S SECOND PETITION TO COMPEL ARBITRATION
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`Security, now operate in Hong Kong andare not subject to oversight by the Hong Kong
`judiciary.
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`(id.)
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`A month later, the State Department was joined by the Treasury, Commerce, and Homeland
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`Security Departments in issuing a “Hong Kong Business Advisory,” in which they warnedthat “the PRC’s
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`imposition of the NSL on Hong Kongin June 2020 led to major structural changes that significantly
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`reduced Hong Kong’s autonomy. Asa result, business and rule of law risks that were formerly limited to
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`mainland China are now increasingly a concern in Hong Kong.” (Ex. 12 [Hong Kong Business Advisory,
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`07/16/21].) They further noted that “[i]ndividuals in Hong Kong have been arrested under the NSL for
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`publishing newspaperarticles, participating in routine democratic processes, expressing an opinion
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`regarding the governmentor the Chinese Communist Party, and attending public gatherings.” (/d.)
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`G.
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`The Cheung Declaration confirms the deterioration of Hong Kong’s political and
`legal environment.
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`The foregoing is broadly confirmed by the Cheung Declaration. Dr. Cheung is a legal academic
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`and formerpractitioner from Hong Kong,andis intimately familiar with how its social, political, and legal
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`institutions have deteriorated in recent years. As Dr. Cheung explains, the social, political, and legal
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`environment in Hong Konghasdeclined significantly from a rule of law perspective, with the Party-state
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`exerting more and more influence, particularly through the imposition of the NSL. (Cheung Decl. {J 14-
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`45.)
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`Indeed, as Dr. Cheung explains, Hong Kong is now best described not as a place with the rule of
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`law atall, but as a “dual state,” where even ostensibly commercial disputes are liable to be decided in
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`accordance with the prerogatives of political authorities rather than the law. U/d. [J 42-44.)
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`Meanwhile, as Dr. Cheung observes,this case is highly likely to attract the negative attention of
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`the Party-state, given the nature of the allegations. (/d. {| 46-50.) Indeed, Dr. Cheungnotes that the NSL
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`is drafted in such broad terms that the mere assertion of certain allegations may very well be construed as
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`a violation of the NSL,to say nothing ofassisting in the investigation of such allegations. (/d. § 51.) That,
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`in turn, creates hitherto unknown risks and uncertainties in terms of whether any institution based in Hong
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`Kongcan credibly oversee the investigation and adjudication of such allegations. (/d.) As for the prospect
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`of conducting substantive arbitration proceedings of this action in Hong Kong, before the HKIAC,Dr.
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`7
`PLAINTIFFS’ OPPOSITION TO TENCENT’S SECOND PETITION TO COMPEL ARBITRATION
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`Cheungis clear that that would likely deprive Plaintiffs of a fair hearing, not least because of the personal
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`safety risks such would entail. (/d. 99] 52-55.)’
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`Il.
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`ARGUMENT
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`A.
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`Arbitrating any aspect of this action in Hong Kong would deprive Plaintiffs of a fair
`hearing in contravention of fundamental U.S.policy.
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`Tencent’s petition should be denied in full because sending this case to the HKIAC would
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`contravene the fundamental U.S. policy of ensuring litigants are afforded due process and a fair hearing.
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`Tencent concedes that under the Federal Arbitration Act (“FAA”) and the Convention on the
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`Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), this Court should
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`not compelarbitration before the HKIAC if doing so would contravene fundamental federal policy. (2nd
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`Pet. at p. 18; Rhone, supra, 712 F.2d at 53 [“an agreement to arbitrate is ‘null and void’ ... when it
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`contravenes fundamental policies of the forum state’’]; Oriental, supra, 609 F. Supp. at 78 [“Under the
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`Convention, an agreementto arbitrate is ‘null and void’... when it contravenes fundamental policies of
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`the forum nation.”].)
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`Moreover, it cannot reasonably be disputed that a fundamental policy of the United States is that
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`litigants are not compelled to resolve their disputes without due process, which requires a fair hearing
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`before a fair tribunal, or that this policy applies to arbitration. (Caperton, supra, 556 U.S. at 876 [“It is
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`axiomatic that a fair trial in a fair tribunal is a basic requirement of due process.”] [cleaned up]; R.R.
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`Comm /’n, supra, 302 U.S. at 393 [“The right to a fair and open hearing is one of the rudiments offair play
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`assured to every litigant by the Federal Constitution as a minimal requirement.”]; Turner, supra, 254 U.S.
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`at 70 [rejecting arbitration process becauseit “denies to the complaining taxpayer due process of law’’];
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`cf Mitsubishi, supra, 473 U.S. at 634, 637 [implicitly recognizing that an international arbitration should
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`only be compelled if it satisfies due process via the retention of “competent, conscientious, and impartial
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`7 Dr. Cheung also points out that it would be a violation of substantive Hong Konglaw forthis case to be
`arbitrated before the HKIAC, given that substantive Hong Kong law requires that consumers agree in
`writing to arbitration after the dispute has arisen. (Cheung Decl. J 10-12.) And given that Tencent
`previously argued against Plaintiffs’ unconscionability argument by citing the AAA Consumer Rules, as
`opposed to the AAA Commercial Rules, (see Tencent’s Reply in Supportof Petition to Compel Arbitration
`(“Ist Pet. Reply”) at p. 14), it cannot now be heard to say that the Doe Plaintiffs should not be considered
`consumers.
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`PLAINTIFFS’ OPPOSITION TO TENCENT’S SECOND PETITION TO COMPEL ARBITRATION
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`arbitrators,” and if “the prospective litigant effectively may vindicate its statutory cause of action in the
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`arbitral forurm”’].)
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`Here,there can belittle doubt that compelling Plaintiffs to arbitrate their claims before the HKIAC
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`would deprive them of the chanceat a fair hearing, in violation of fundamental U.S. policy. That is because
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`the nature of Plaintiffs’ allegations, combined with recent developments in Hong Kong, makeit unlikely
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`that any institution based in Hong Kong, including the HKIAC,can fairly, credibly, and effectively
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`oversee the investigation and adjudication of those allegations.
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`Indeed, as Dr. Cheung opines, “the nature of Plaintiffs’ allegations, combined with recent social,
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`political, and legal developments in Hong Kong,especially after June 2020 [when the NSL was imposed],
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`create risks and uncertainties regarding the ability of any institution based in Hong Kongto effectively
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`oversee the investigation and adjudication ofthose allegations.” (Cheung Decl. { 8, italics added.) And as
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`he further opines, “the Party-state is likely to attempt to pressure any Hong Kong-basedinstitution
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`adjudicating [Plaintiffs’] allegations to bend the proceedings in the Party-state’s interests, undermining
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`Plaintiffs’ ability to obtain a fair hearing of those allegations.” (/d. J 54, italics added.)
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`In fact, as Dr. Cheung explains, “the mere act of making somethe allegations pleaded in the
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`Complaint could be construed as a violation of the NSL. So too could the act of assisting in the
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`investigation of such allegations.” (/d. § 51, italics added.) As such, compelling arbitration in Hong Kong
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`may well risk the personal safety of the Plaintiffs themselves, as well as their lawyers.
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`Indeed, in connection with the 2019 pro-democracy movement in Hong Kong,Party-state media
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`(falsely) accused Plaintiff Citizen Power Initiatives for China (“CPIFC”’) of having hosted a “camp” for
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`““anti-China and separatist’ organizations to study how to confront China every year.” (Ex. 13 [Global
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`Times 08/18/19 article].) And it (falsely) accused CPIFC’s founder and president Dr. Jianli Yang—who’d
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`previously been imprisoned by the Party-state for five years between 2002 and 2007 (4 122-127)—as“a
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`spy for Taiwan.” (/d.) Given that, if CPIFC were compelled to arbitrate its claims in Hong Kong,its
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`employees and representatives are virtually guaranteedto beat risk ofarrest, if not worse.®
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`8 So too certain of the Doe Plaintiffs, which include persons who hadparticipated in political activities in
`the PRC that drew the ire of the Party-state, and which include persons who have applied for political
`asylum in the United States.
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`PLAINTIFFS’ OPPOSITION TO TENCENT’S SECOND PETITION TO COMPEL ARBITRATION
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`Moreover, it is not only Plaintiffs and their representatives who mightbe at risk, but also “any
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`arbitrator or panel of arbitrators based in Hong Kong [that might] issue rulings favoring the Plaintiffs[.]”
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`(Cheung Decl. § 53.)
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`This is especially true of that Plaintiffs’ allegations about the PRC Data-Routing Scheme. As Dr.
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`Cheung explains, “the Party-state would have a strong interest in concealing evidence ofthis alleg