WeChat Banned! What This Means for Users

Schuyler "Rocky" Reidel

Schuyler "Rocky" Reidel

Schuyler is the founder and managing attorney for Reidel Law Firm.

On August 6 and 7, US President, Donald Trump announced an Executive Order banning transacting with the Chinese owned apps, WeChat and TikTok. The announcement comes after several similar edicts requiring federal workers remove such apps from any devices used at work or on US government networks. As a frequent user of WeChat myself for communicating with both business colleagues and friends, I thought it would be helpful to layout Trump’s order and the impact it may have for users in the near future.

What is an Executive Order?
An executive order is a written and signed directive from the President of the United States that manages operations of the federal government. Historically, these were used infrequently as a way to direct how the federal government was to implement the laws of the United States (also called legislation) as written and approved by Congress. Executive orders are not legislation, or laws, of the United States but may determine how the laws of the United States to be implemented or funded.

While the vast majority of executive orders are not controversial and provide the federal agencies and bureaucracy with guidance and direction in carrying out the laws of the United States, some executive orders have been used by presidents to de-fund legislation that the President disapproves or take action that Congress has been unable to reach a consensus. Recent executive orders by President Trump have been aimed at strengthening US economic positions by restricting trade and sanctioning certain industries or companies.

What is the Scope of the Order?
The Executive Order prohibits “any transaction that is related to WeChat by any person, or with respect to any property, subject to the jurisdiction of the United States, with Tencent Holdings Ltd, or any subsidiaries of that entity, as identified by the Secretary of Commerce”. There is inherent ambiguity in the Order that could be interpreted broadly, encompassing everyday users of the app, or interpreted narrowly, and only affect those companies transacting business with Tencent corporation. The Order notes that after 45 days, the U.S. Secretary of Commerce shall “identify the transactions that will be subjected to the ban”. This will be an important factor in how the Order will affect everyday users like myself and most of my readers today.

It is unclear whether the ban will focus solely on “WeChat the app” or “Tencent the corporation”. The wording of the Order seems to allow interpretation in both scenarios, which would have drastically different consequences. If focused solely on WeChat, it would presumably result in the WeChat app stopping operation for users in the U.S. However, if applicable to “Tencent the corporation”, there could be notable disruption to Tencent’s online game operation and its investment portfolio in U.S. companies, which may ultimately lead to the de-listing of the company from the US stock exchanges. It is still unclear whether the ban will lead to WeChat being removed from the iOS app store, either in China or the US, considering Apple is under U.S. jurisdiction. Also, it’s unclear whether the ban will block U.S. companies from using WeChat business functions, including payment and mini programs, to reach consumers in China.

How Does this Affect Users?
As of now, the Order has not affected US users of WeChat app nor any shareholders of Tencent in the US exchange. In the next 45 days, this may change drastically though. Should the Secretary of Commerce make a determination that the Order affects both Tencent corporate transactions and the WeChat app, then I would expect the app to become unusable within the US, likely removed from app stores in the US, and the beginning of the de-listing of Tencent from US exchanges.

It is likely this will be the interpretation of the Order by the Commerce Department. If your business relies heavily on WeChat for communications, I would strongly recommend starting to backup or transfer your contacts and essential communications off of WeChat onto alternatives. Even though you may have up to 45 days under the Order, it is typical that tech companies in the US that may be subject to the order will take actions prior to this to reduce any potential liability or exposure.

Does the President Have the Power to Ban Companies or Apps?
The Order cites the President’s powers under the International Emergency Economic Powers Act (IEEPA) which was passed in the late 70s in response to events overseas that threaten the US economy. It was first used during the Iran hostage crisis to freeze and block assets of the Iranian government. The IEEPA has wide ranging powers authorizing the President to declare an unusual and extraordinary threat to the US and to take actions to block transactions and freeze assets to deal with the threat. It may also be used to confiscate property from those parties involved in perpetrating the national emergency or threat to the US.

Under the IEEPA, the President does have the power to designate and sanction certain countries, companies, and even individuals to mitigate a certain risk or national emergency. Courts and Congress have been reluctant to limit these powers in recent cases. Outside of this specific Act (IEEPA) and the necessary circumstances to trigger sanctions, the President does not have the ability to ban companies or seize property without due process, which means without allowing the person to defend themself and have a neutral court rule on the matter. This should not be a concern to everyday, average users of WeChat. But those individuals and companies engaged in international trade should be cognizant and avoid any sanctioned parties or countries in their business transactions.

Can Tencent Prevent the Banning?
Luckily, in the US anyone can sue anybody for any reason. This includes he government which is often subject to lawsuits by citizens and non-citizens alike. Whether the laws of the United States and the circumstances to the matter will allow a lawsuit to proceed and be successful is an entirely different analysis. So, in short – Yes, Tencent can certainly sue the US government regarding the Order and seek to have it reviewed by the US court system.

But cases under the IEEPA often fail against the US government. The law is very broad and has not been successfully challenged to my knowledge. In fact, under Dames &Moore v. Regan in 1981, our Supreme Court ruled that the IEEPA was legal and constitutional. At this point with what little the public knows about the matter, I believe Tencent will likely not have any economical legal recourse to prevent the banning.

Don’t jeopardize your future – everyday your livelihood is under threat from the government, agencies, and unscrupulous individuals. You need people on your side, putting up defenses to protect your family, future, and business. Our firm helps business owners build wealth, preserve your estate, transition wealth to future generations, and add diversity to your portfolio. A little legal now can save you money tomorrow. For help with ensuring your international business transactions are fully compliant, call Reidel Law Firm today. You can reach us at +1(832)510-3292 or using the form below. We’d love to find a way to protect you and your business.

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