Huawei Goes on Legal Warpath With Twin North American Suits
Huawei CFO Seeks to Undermine Extradition Case With Civil Suit
(Bloomberg) -- Huawei Technologies Co., no longer content with defending itself against U.S. accusations of espionage and bank fraud, is taking the initiative with a full-blown legal offensive.
The Chinese technology giant intends to file a lawsuit this week claiming the U.S. government is overstepping by banning Huawei equipment from certain networks, according to people familiar with the matter. That complaint would come just days after finance chief Meng Wanzhou sued Canada’s government for allegedly trampling her constitutional rights -- an effort to discredit the case against her as she awaits potential extradition to the U.S. for bank fraud.
The long-secretive Huawei began to open up this year with founder Ren Zhengfei giving interviews to foreign media and personally denying accusations his company aids Beijing in espionage. But the legal effort signals a more aggressive assault on its American accusers, who have been trying to persuade other countries to ban Huawei gear from communications networks.
Huawei’s lawsuit against the U.S. is aimed at a law that blocks certain government agencies from using equipment from Huawei and its domestic rival ZTE Corp., the people said. Huawei is likely to argue that it’s unconstitutional to single out a person or a group for a penalty without trial, they said. Huawei declined to comment on the lawsuit, which was first reported by the New York Times.
Meng’s complaint is more personal. In a civil suit filed Friday, she claims officers failed to immediately arrest her on Dec. 1 in Vancouver on a U.S. extradition request and instead first detained her under the guise of a routine custom check to “unlawfully compel her to provide evidence and information.” The suit, filed in the Supreme Court of British Columbia, is against the Canadian Border Services Agency, a Royal Canadian Mounted Police officer and the Canadian government.
Her action is “probably an effort to raise the stakes for the Canadian government,” Craig Forcese, a law professor at the University of Ottawa with expertise in international and constitutional law, said by email. “One might call it a form of ‘lawfare.’”
Canada’s Justice Minister David Lametti will ultimately be the one to sign off on any extradition -- Meng’s allegations about her arrest could potentially play into that final decision.
According to the complaint, the officers detained Meng on the jetway as she was getting off a flight, took away two phones, an iPad and a computer, then got her to surrender the passwords to those devices. She was formally arrested only about three hours after her initial detention, the claim says.
Huawei is increasingly in the crosshairs of the U.S. government and its allies, just as it’s pushing for leadership in supplying fifth-generation wireless technology. Countries are preparing to spend billions on the potentially revolutionary equipment aimed at enabling everything from smart highways to self-driving cars.
Huawei is bolstering its own finances with a battle ahead. The company raised 14 billion yuan ($2.1 billion) through a syndicated loan, according to people familiar with the matter. Bank of China Ltd., China Construction Bank Corp., China Development Bank, China Merchants Bank Co. and Industrial and Commercial Bank of China Ltd. were lenders on the five-year facility, said the people who aren’t authorized to speak publicly and asked not to be identified
The world’s top provider of networking gear faces the prospect of being shut out of pivotal infrastructure markets, as it faces criminal charges in the U.S. and an American effort to convince allies not to use its equipment. The clash has complicated negotiations between Washington and Beijing as they try to hammer out a trade deal.
It’s not clear how effective Huawei’s lawsuits will be. The Justice Department has sued Huawei for alleged theft of trade secrets, separate from its case against Meng. The U.S. is seeking Meng’s handover to face fraud charges, alleging she lied to banks to trick them into processing transactions for Huawei that potentially violated Iran trade sanctions. The allegations date back years -- a main pillar of the U.S. case is a July 2013 PowerPoint presentation that Meng gave to a HSBC Holdings Plc executive.
In the CFO’s suit in Canada, she seeks damages for misfeasance of public office by customs officials, breaches of her constitutional rights, and false imprisonment, according to the suit. “Each of these causes of action has distinct elements -- none will be easy to establish,” Forcese said.
While Canada’s Charter rights attach to all people, regardless of nationality or immigration status, courts have tended to concur with the government that such rights are “more attenuated at the border,” he said. One Supreme Court ruling, for example, clearly noted that people don’t expect to be able to cross international borders free from scrutiny.
Whatever evidence Canadian authorities obtained at the airport is likely irrelevant to the bank fraud case, Forcese said. Furthermore, in Canada, extradition hearings aren’t trials, and admitting new evidence is difficult.
That said, extradition judges can rule on constitutional issues, says Gary Botting, a Vancouver-based lawyer who’s been involved in hundreds of extradition cases.
“If the judge finds that the violation of Charter rights negatively impacted the extradition process, including the fairness of the hearing, he or she will be obliged to discharge her,” Botting said. "Then the civil proceedings will begin in earnest."
Given Meng’s wealth -- she’s the daughter of Ren -- few believe that financial compensation is the motivation for the lawsuit. Short of being released, the civil suit could help her defense obtain more disclosure in her extradition case.
“The obligation of the parties to provide full disclosure in the civil case may simplify the task of the extradition team,” said Botting.
The civil case is unlikely to undermine any key elements of the extradition case but could still affect the outcome, said Carissima Mathen, vice-dean of law at the University of Ottawa. “It is possible that this could feed into an abuse of process claim whereby the extradition judge is asked to throw out the entire thing. If so, then that would delay the main proceedings,” she wrote in an email.
--With assistance from Josh Wingrove and Carol Zhong.
To contact the reporters on this story: Natalie Obiko Pearson in Vancouver at npearson7@bloomberg.net;Gao Yuan in Beijing at ygao199@bloomberg.net
To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net, Edwin Chan, Peter Elstrom
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