IS HUAWEI CAUGHT IN US WEB OF INTRIGUE?

US Long-arm Jurisdiction:  the Case of Meng Wanzhou and US president elect Biden’s continuing Securitisation of Technology

More than two years after her arrest, Huawei CFO, Meng Wanzhou, is again appearing in a Vancouver court extradition hearing arguing that her arrest was both unlawful and flawed in execution. Moreover, earlier this week, unnamed sources were cited by both the Wall Street Journal (WSJ) and Reuters stating that Meng’s US lawyers were negotiating with the US Department of Justice (DoJ) to reach an agreement that would allow her to return to China in exchange for an admission of wrongdoing. The US presidential transition appears to be the catalyst for the rumoured negotiations, however, any admission of wrongdoing would almost certainly give legal credence to continuing and future US long-arm jurisdiction cases against both Huawei and its management. With nothing concrete announced and no timeline evident, Meng’s Canadian legal team and lawyers for Canada’s attorney general have no choice but to continue the extradition proceedings that have been playing out in the British Columbia Vancouver Supreme Court since her arrest in 2018. 

In the case of Meng Wanzhou, both the US and Canadian governments seem to have simply disregarded the four principles which are generally accepted as governing the proper exercise of jurisdiction: nationality, protective jurisdiction, universality and subjective territoriality. It is the constant testing of the limits of this power to proscribe conduct abroad where it affects ‘commerce with foreign nations’ which has resulted in tensions with China and a number of other important trading partners of the United States and Canada. For many observers, the US government’s extraterritorial legal framework can be clearly seen as a continuing attempt to apply US laws and regulations to [commercial] conduct or property beyond its national boundaries. The resulting international disputes become particularly serious when the legal arguments embody major disagreements over foreign policy. Thus conflicts of jurisdiction are at the intersection of law and diplomacy, making the topic especially appropriate for investigation in the case of Huawei and other Chinese entities.

While there is little doubt as to the power of US courts over aliens or their actions within the US, jurisdiction over their activities outside of the US is less clear. Courts have assumed the existence of judicial as well as legislative jurisdiction over these activities with little critical inquiry as to the basis for these assumptions. Moreover, traditional methods of jurisprudential analysis limit the power of a court to apply its laws beyond the borders of its territorial limits. Increasingly, however, in US courts these territorial limitations have been pushed back in favor of a more subjectiveinterest analysis based upon less precisely defined principles of jurisdiction.

Incidents causing tensions in Sino-US relations have become more frequent under the Trump administration as China has become a crucial contributor to global industrial supply chains, digital information networks and largest single constructor and financier of global public goods. By examining the the case of Huawei, it is hoped that the US can come to an appreciation and, eventually, to an accommodation of the many different viewpoints respecting the proper application of national laws to conduct abroad that is often defined as ‘economic statecraft’. 

This is a president [Trump] whose foreign policy is defined by the ‘weaponisation’ of US long-arm jurisdiction. (Drezner, 2019).

Economic statecraft increasingly lies at the heart of US foreign policy. From the 1807 Embargo Act to the Open Door policies, from the Marshall Plan to the Global Magnitsky Act, US policymakers have wielded US economic centrality to the global financial system as a means to enhance American power, and as a consequence, increasingly trended to the ‘weaponisation’ of economic sanctions. In this regard, the Trump presidency stands out from preceeding administrations in its frequency and ambition to harness economic leverage to extract concessions across a wide array of security and economic issues. However, Trump’s efforts to coercively link economic access with security issues have proved to be far from effective. As discussed below, the administration’s attempts to limit Huawei’s role in the construction of 5G networks in allied countries has had limited success. After Canada complied with a US request to arrest Meng Wanzhou, Trump hinted that her case could be resolved as part of a broader trade deal with China (Sink, 2018). Beijing ignored that linkage, instead arresting two Canadians, considered [by the US and Canada] as retaliation. 

In the period 2017-2020, the global growth of Huawei - a widely recognised global telecommunications and technology organisation with an unique management culture and employee ownership structure that supports a deep pool of research and development talent and a successful customer focused ethos - was severely curtailed by unprecedented commercial restrictions, imposed under various ‘security’ provisions of US law via long-arm jurisdiction. 

The term ‘extraterritorial jurisdiction’ describes a situation in which one state will assume subject matter jurisdiction and apply its substantive national laws to persons and activities outside of its physical domain (Sabalot, 1982). 

Since taking office, the US Trump administration has either imposed trade and economic sanctions or escalated economic pressure against a long list of nations, including Canada, Mexico, Japan, [South] Korea, Russia, India, China, and the European Union (EU). It has also applied worldwide tariffs on steel and aluminum imports, sanctioned Chinese corporations for alleged ownership by the PRC military; sanctioned Chinese individuals for carrying out their official duties in Xinjiang, Hong Kong and or the South China Sea and; severely disrupted the China-US semiconductor industrial supply chain. Predominant amongst the US sanctions target list of Chinese enterprises has been Huawei, the global leader in 5G technology and telecommunications infrastructure and a prominent manufacturer of mobile [5G] phones and personal computing devices. Huawei executives have also been targeted. Most notably, the Huawei Chief Financial Officer (CFO) Meng Wanzhou who is the daughter of Huawei founder and Chief Executive Officer (CEO) Ren Zhengfei. 

Nevertheless, the adoption and application of long-arm jurisdiction laws by the US and Canada, ostensibly to protect them from perceived threats from foreign capital, must be balanced against the risks of adopting authorities to act unilaterally as accuser, judge and jury. One consideration often overlooked in the adoption of such laws is the capacity of adopting governments to abuse such legislation for purely political and economic considerations. In the case of Huawei and Meng Wanzhou there is considerable evidence that the intended purpose of the Magnitsky law’ is not human rights but long-arm jurisdiction capacity to limit the activities of Chinese and other designated [US] national security adversaries (Whitehouse, 2017). Moreover, such laws restrict the rights of ‘foreign’ individuals and entities to rebut or retaliate against unproven allegations of ‘human rights’ abuses. In the case of Huawei executive Meng Wanzhou, her arrest was based solely on unproven charges of fraud in an eight year old US DoJ long-arm jurisdiction case involving HSBC bank and the activities of a Huawei third party contractor in Iran. 

The details of Meng’s ongoing legal case are currently being circulated widely by global media sources, however, it is informative to first provide a brief overview of her original detainment and arrest while in transit at the Vancouver international airport on a connecting flight from Hong Kong via Vancouver to Mexico City, on December 1st 2018. Meng was officially arrested by the Royal Canadian Mounted Police (RCMP), in response to a warrant issued by the US District Court in Brooklyn, New York City, New York, following three hours of detainment by the Canadian Border Services Agency (CBSA). Moreover, Meng’s rights under Canada’s Charter of Rights and Freedoms, which outline the civil rights of anyone in Canada, citizen or otherwise, may have been violated. Court documents show Meng was questioned during that time, by CBSA officers, without any legal representation and compelled to hand over her electronic devices – a Huawei Mate 20 Pro, Apple iPhone 7 Plus, Apple iPad, Apple MacBook computer, and a USB flash memory stick - as well as their relevant password access codes. The passwords were then [mistakenly] handed over to the Royal Canadian Mounted Police (RCMP) and entered into the court record of Meng’s case. Crucially, email records of a RCMP officer dated December 2nd, 2018, - deleted in 2019 when the officer retired - and notes from a second RCMP officer dated December 12th, 2018, indicate that Meng’s device serial numbers, SIM cards and international mobile identity numbers may have been shared with the US Federal Bureau of Investigation (FBI) - international mobile identity numbers allow authorities, such as the FBI, to trace phone records including the time and duration of calls, sender and receiver phone numbers and the locations of cell towers that connected the calls (Proctor, 2020). In fact, US authorities [FBI] had been monitoring Meng’s movements for some time. 

The warrant issued by the US District Court in Brooklyn, New York had been drafted on August 22nd, 2018, but not delivered to the Canadians until November 30. Accompaning the warrant was a note urging ‘immediate action’, because US officials were not certain when another opportunity might arise. However, the note also outlined that between August 22nd, 2018 and December 1st, 2018, Meng had visited the UK, Ireland, Japan, France, Poland and Belgium, all of which have extradition treaties with the US. Moreover, had Meng been allowed to leave Vancouver, she would have visited Mexico, Costa Rica and Argentina, which also have extradition treaties with the US.

In order to better understand the events leading to Meng’s arrest and two-year house arrest it is worthwhile providing a detailed report on the source of the US allegations that led to the issuance of the US warrant under which the RCMP arrested Meng Wanzhou. Three Reuters news articles, one in 2012 and two from 2013, may have inspired the US DoJ to consider accusing HSBC and Huawei of violating the US sanctions on Iran. The US government allegations against Meng, similar to the material contained in the Reuters articles, are based on a 2012 US Department of Justice (DoJ) probe into HSBC that resulted in the bank paying USD$1.92 billion and entered into a five-year deferred prosecution agreement for disregarding rules designed to prevent money laundering and processing transactions that violated US [Iran] sanctions. Under the deal, HSBC agreed to strengthen its sanctions and anti-money laundering programs and to cooperate with the Justice Department in any investigations. As a result, HSBC hired the law firm Latham & Watkins to conduct an internal probe of its past business with client firms operating in Iran in late 2016 and 2017. According to the documents, investigators conducted more than one-hundred interviews, reviewed more than 292,000 emails and analysed years of financial transactions. The bank’s findings, which have not been made public, were given in a series of presentations to the DOJ between February and July of 2017 and resulted in US criminal charges against HSBCbeing dismissed in December of 2017.

The US federal court warrant alleges that Huawei used Skycom, a Huawei business partner in Iran, attempted to sell at least Euro€1.3 million worth of embargoed Hewlett-Packard computer equipment to Iran’s largest mobile phone operator in 2010. The sale was not finalised. Moreover, the US indictment alleges that Huawei had deceived HSBC, Standard Chartered, BNP Paribas SA and Citigroup to clear over USD$100 million of transactions related to Skycom, which potentially violated US government economic sanctions that prohibited business with Iran. 

The HSBC internal probe found that in August 2013, at Huawei’s request, HSBC’s then deputy head of global banking for the Asia Pacific region, Alan Thomas, had met with Meng and, subsequently she had provided him with an English language Microsoft PowerPoint presentation. The presentation stated that Huawei had sold its shares in Skycom, that Meng was no longer on its board and that “Huawei’s engagement with Skycom was a normal and controllable business operation,” and that “as a business partner of Huawei, Skycom works with Huawei in sales and service in Iran.” At that time, HSBC considered the reputational risks in retaining the Huawei business and eventually concluded they wereacceptable. The US indictment indicates that HSBC had told Huawei, “around 2017,” that it was terminating the relationship. The presentation, which the US alleges contained ‘numerous misrepresentations’, is the key evidence in the US criminal case against Meng. Huawei and Skycom are also defendants in the US case, accused of bank and wire fraud, as well as violating US sanctions on Iran.

As the CFO of Huawei, Meng was also involved in operations in Syria, Sudan and third-party contractors in Iran (Reuters, 2020).  HSBC told the US DoJ that it was aware of another company linked to Skycom in Iran. According to HSBC’s investigation documents, in August 2016, the bank was notified by the British engineering recruitment company, Matchtech Group Ltd, that a Matchtech subsidiary, Networkers International Ltd, had contracted with Skycom and Huawei to provide contractors to support telecommunications projects in Iran. Between 2010 and2016, Networkers International received USD$7.6 million in contract payments from Skycom before terminating the [Iran] contract in October 2016. The HSBC probe also uncovered financial transactions that referred to Syria, or a Syrian bank, by Canicula, the parent corporation of Skycom. Huawei had helped finance Canicula’s purchase of Skycom in 2009, lending Canicula about Euro€14 million (Dh58.52m), which, using funds from Skycom, was repaid to Huawei in 2010. At the request of HSBC, Huawei assisted the bank to close the Skycom and Canicula accounts in 2013and all remaining funds were transferred to a Huawei [HSBC] account (Lewis, 2020; Bloomberg, 2020). 

Until the election of Donald Trump, the US had not actively pursued Huawei and the telecommunications company had operated normally within US territorial jurisdictions. However, In 2018, the Trump administration began to impose a series of sanctions and law enforcement measures designed to stop Huawei from establishing the global network standard for 5G - the next generation of cellular network technology offering broadband access - insisting that the Chinese government would exploit Huawei’s role in any 5G network to gain covert access to confidential data and therefore that it compromised national security. Initially, the Trump administration banned Huawei phones from being sold at US military installations and prohibited US government contractors from using Huawei devices. By May 2019, US intelligence officials had suggested that Huawei could eventually control as much as sixty percent of the global 5G network. Thus, Huawei was put on the Commerce Department’s ‘entity list’, which bans firms from selling inputs to the Chinese company without federal government approval. The administration also threatened US allies stating that “cooperation on intelligence-sharing could be severed unless they restricted Huawei’s role in crafting their 5G networks.” 

Consequently, the Trump administration embarked on a months-long campaign to convince allies to block Huawei from participating in construction of their 5G networks, which failed with two notable exceptions. Australia followed America’s lead and became the first of US allies to completely ban Huawei from its telecommunications networks. The UK, however, was initially reticent to completely ban Huawei and put in place a partial ban. In mid 2020, after considerable lobbying by the US and Secretary of State Mike Pompeo, the Johnson government backtracked and finally agreed to place a total ban on Huawei equipment from its telecommunications networks at considerable cost, both financial and in terms of the timeline for the UK-wide rollout of 5G. The US allies that comprise the NATO membership, however, refused to follow the US, forcing the Trump administration to restrain its belligerence. 

In fact, the Trump administration’s unrelenting attacks on Huawei and ZTE, which were accompanied by claims that it wants China to further open its economy, have only resulted in convincing China’s leadership that it should accelerate efforts that ensure economic autonomy and, in particular, the design and manufacture of semiconductors ‘free’ of US componants and or software. Moreover, Canada’s early adoption of a ‘Magnitsky law’, passed unanimously by the Canadian House of Commons in 2017, connects ‘human rights’ with long-arm jurisdiction and sanctions visa bans and asset seizures against foreign individuals, under the pretext that it protects national sovereignty from what the US government funded National Endowment for Democracy (NED) calls “the corrosive effects of corrupt foreign capital.” It should be noted that the NED is the same organisation that the PRC says funded, trained and directed the year long protests in Hong Kong over ‘foreign security laws’.

The ongoing extradition hearing in Vancouver is still far from over and the Canadian attorny generals office has said that it may wish to call more witnesses in order to rebut earlier testimony from key witnesses. Meng Wanzhou’s legal team has said that it plans to use the evidence gathered during these proceedings at a hearing next spring, where they will ask the presiding judge to dismiss the case. The defense will also argue Meng Wanzhou is being used as a bargaining chip in the ongoing trade war between the US and China and, critically, that US officials misled Canada about the veracity of its case. In regards to the rumours of a ‘plea’ bargain with the US DoJ, Canadian Prime Minister Justin Trudeau has refused to comment and it is highly unlikely that Meng will admit to ‘wrongdoing’. Therefore, it is also highly unlikely that Meng will be boarding a plane to China anytime soon or that Huawei will receive a reprieve from US sanctions under US president elect, Jo Biden.

In fact, Biden has stated that he will target Chinese tech giants, such as Tencent, Alibaba, Baidu, Huawei, Tik Tok and others, because they empower “the surveillance state, gutting privacy, facilitating repression in China and elsewhere, spreading hate and misinformation, spurring people to violence, or remaining susceptible to other misuse.” Thus, it is clear that the Biden administration will continue long-arm jurisdiction campaigns against China’s globally successful technology, social media and fintech enterprises, in order to protect US technology giants. However, both domestically and in the EU, there is growing concern about US tech and social media corporations. Further monopolisation of domestic and EU markets by US tech and media, ongoing privacy concerns about data transfer to the US and potential damage to EU exports [to China] through secondary and tertiary sanctioning of ‘technology’ will not be welcomed in the EU (Biden, 2020). 

Biden’s approach to ‘disruptive technology’, such as 5G and artificial intelligence will almost certainly continue the ‘securitisation’ policies of the Trump administration. However, Biden frames his policy as the “promotion of greater democracy and shared prosperity” implying that China is harnessing its tech prowess to “curb freedom and opportunity at home and abroad.” Thus, the US will join together with its Anglo-American allies Canada, Britain and Australia “to develop secure, private-sector-led 5G networks.” Clearly, the Trump, Pompeo era ‘Clean Network’ and bans and sanctions on Tik Tok, Tencent and Huawei, including the sale of semiconductors and equipment for semiconductor design and manufacture using ‘long-arm jurisdiction’ are to stay in place. 

In fact, Biden doubles-down on the securitisation of technology by stating that “we must ensure that these engines of progress are bound by laws and ethics, as we have done at previous technological turning points in history, and avoid a race to the bottom, where the rules of the digital age are written by China and Russia” (Biden, 2020). Clearly, the logic and purpose of US long-arm jurisdiction is not to improve global ‘human rights’, but rather, to control standards, dislocate supply chains, exclude market access and, most importantly, gain time at China’s expense, while the US and its allies forge “a technological future” by ‘disrupting’ China’s advances and commercial success in technologies “that reshape the economy and society.” For Meng Wanzhou and Huawei the transition to a Biden presidency does not equate to US claims that it promotes the establishment and maintenance of international relations on the basis of law and justice or that its exercise of long-arm jurisdiction is reasonably justified and or meets the principal national objectives of the US in international law and or foreign policy. 

By Digby Wren

(Deakin University, Melbourne, Australia - Visiting International Relations Scholar at Sichuan Normal University, Chengdu, China)