Human rights group the World Organization for Human Rights USA has filed a lawsuit in the US against Yahoo for allegedly playing a part in the conviction and imprisonment of Chinese 'cyber-dissidents'.
Several internet users in China who spoke out against the Chinese government online have been convicted of breaking the country's freedom of speech laws after their personal details were handed over to the Chinese government by Yahoo.
Yahoo has admitted handing over the email and IP addresses of the activists, but claimed that it was legally bound to comply with the laws of the countries in which it operates.
Yahoo is accused of failing in its 'ethical responsibilities' by not asking the Chinese government why it was asking for the information.
"While it is clear that American corporations are obliged to follow foreign laws, they must also abide by US and international law," said Morton Sklar, executive director of The World Organisation for Human Rights USA.
Yahoo has hit back saying that it "deeply sympathised" with the plaintiffs and their families and "did not condone the suppression of their rights and liberty by their government".
However, the web giant added that it has "no control over the sovereign government of the People's Republic of China, the laws it passes and the manner in which it enforces its laws".
A Yahoo spokeswoman said in a statement: "This is a political and diplomatic issue, not a legal one.
"The real issue here is the plaintiffs' outrage at the behaviour and laws of the Chinese government. The US court system is not the forum for addressing these political concerns."
Yahoo is not the first company to come under fire for its dealings with the Chinese authorities. Several other search firms, including Google, have been criticised for censoring search results viewed by Chinese internet users.
Are you paying attention?
Private equity firm Permira only acquired Magento from eBay for $200m three years ago
Before robots can take over from humans, we need more humans
It's not easy not being evil