Businesses linked to national security can lawfully refuse to hire Chinese or Russian workers over fears they could be spies, a tribunal has ruled.

Employment Judge Richard Baty said companies working in defence were within their rights to bar citizens from hostile nations due to the risk of espionage, reports The Times.

The decision followed a legal challenge by Chinese scientist Tianlin Xu, who accused a British artificial intelligence firm of discrimination after she was denied a high-paying role.

Judge Baty said precautionary restrictions on applicants from China, Russia, North Korea and Iran were justified when national security was at stake.

Xu had applied for a £220,000-a-year lead role at Binary AI, a London-based software firm working with both British and US defence departments.

But founder James Patrick-Evans rejected her application, citing serious concerns about national security.

Binary AI specialises in using artificial intelligence to detect vulnerabilities in defence software – the kind used by Western governments to stop hackers from infiltrating critical systems.

Russia and China have long been suspected of orchestrating cyberattacks. Only last year, Dutch security services linked both governments to a series of hacks in the Netherlands.

The tribunal heard that British defence officials had “strongly advised” Binary AI against hiring a Chinese national.

Xu, 32, later sued the company for race discrimination, claiming she had been subjected to “racial stigma” and “stereotyping”.

But Judge Baty dismissed the complaint, warning that the risk to national infrastructure could not be ignored.

He said: “It is paramount that the security and operational capability of the software that drives our everyday lives should remain intact and free from malicious hackers and state actors wanting to persuade political outcomes or obtain sensitive information.”

The judge also pointed to repeated attacks by hacking groups on the Five Eyes alliance – comprising the UK, US, Canada, Australia and New Zealand – often backed by states including China, Russia, Iran and North Korea.

These groups have attempted to gain “malicious remote access into software that forms the backbone of UK infrastructure such as 5G telecoms, NHS health networks, power plant controllers and water infrastructure systems,” he said.

He added: “It is therefore imperative that the security of the software that drives these systems is verified, controlled and secured.”

Baty said it was legal to exclude any Chinese citizen from working in a role like the one at Binary AI, where national security was directly involved.

He also clarified that the hiring restriction had come from defence customers, not Binary AI or its director.

Patrick-Evans, he said, had “legitimately understood” that Xu would be unable to obtain the necessary security clearance “because she was a Chinese national”.