As the lengthy extradition case of Huawei’s Chief Financial Officer (CFO) Meng Wanzhou enters its final stage, a Canadian judge on Thursday challenged the validity of U.S. claims against Meng at the latest court hearings in Vancouver, Canada.
Lawyers for Canadian prosecutors were asked to clarify and provide more legal basis on the record of the case (ROC), which were submitted by the U.S. as justification for Meng’s arrest and extradition.
The CFO of Chinese telecom giant Huawei was arrested at Vancouver International Airport in December 2018, following a U.S. request, for allegedly defrauding HSBC bank about Huawei’s dealings in Iran, which Meng has denied. The charge alleged that Meng misled bankers in a 2013 presentation about Huawei’s relationship with an Iran-based company named Skycom Tech Co., and potentially caused the bank to violate U.S. sanctions.
A usual fraud case or not?
The prosecution believes this to be a typical case of fraud, involving lying to a bank to ensure the completion of services. However, the judge suggested the case is more unusual and lacks validity, because HSBC didn’t suffer any losses and was not directly deceived by Meng.
“Isn’t it unusual that one would see a fraud case with no actual harm, many years later, and one in which the alleged victim – a large institution – appears to have a number of its employees who had all the facts about the relationship that are now said to have been misrepresented?,” asked Heather Holmes, Associate Chief Justice, a court hearing note acquired by Pandaily showed.
Robert Frater, a Canadian Department of Justice lawyer representing U.S. interests in the case, admitted that people within the institution may have known and even participated, but this fact alone doesn’t mean no fraud took place.
In response, Meng’s defense lawyer Eric Gottardi claimed most fraud cases involve a victim being cheated out of their money, but in Meng’s case, “the theory of economic loss by HSBC is wholly illusory and fatally flawed,” adding that the U.S. case was based on “vague and shifting theories of risk and causation,” according to a South China Morning Post report.
Arguments lacking consistency
On the one hand, the record pointed out that Meng promised Skycom wouldn’t cause any risk to HSBC by asking the company to observe relevant U.S. laws, regulations and export control requirements. On the other hand, the allegations accused Meng’s team of failing to disclose the authentic relationship between Huawei and Skycom.
“How would she be able to give that assurance of compliance in a convincing way unless Huawei was in control of Skycom?” Holmes asked, suggesting the two points contradicted with each other.
“I’m wondering whether it’s reasonable to assume that an international bank would rely on an assurance from one person about compliance by other companies not under Huawei’s direct control,” she added.
Earlier in July, Meng’s legal team attempted to apply to add a trove of documents which showed at least two senior HSBC leaders were aware of relations between Huawei and Skycom as evidence to her extradition case but was denied by the court.
“We respect the court’s ruling, but regret this outcome,” Huawei Canada said in a statement released after the ruling, insisting that the documents showed HSBC was aware of Huawei’s business dealings in Iran, proving that the U.S. account of the case was “manifestly unreliable.”
Who should be blamed for the penalty risk?
According to a Bloomberg report, the U.S. claims jurisdiction in part because the transactions that HSBC handled for Huawei were cleared in American dollars. Prosecutors in the U.S. have frequently brought charges against foreign nationals based on their use of so-called “dollar clearing.”
Considering that not all operations in Iran were deemed violations, the judge believed the U.S. record failed to clearly explain the standard for a violation concerning transactions in Iran and U.S. dollar clearing.
The bank knew Huawei does business in Iran and yet continued to do business with Huawei. It’s likely that HSBC would counter the U.S. government penalty for using the dollar clearing system under this circumstance.
“Is Meng the one reasonably to advise HSBC on dollar clearing?” Holmes puzzled, saying she had great difficulty in understanding what it is about the commercial dealings of Huawei and Skycom that is said to have engaged the U.S. sanctions.
According to the banking principles listed by the U.S. Department of Commerce, it is the responsibility and scope of work of the bank to determine the route through which the transaction is cleared, rather than the responsibility of the bank client.
What‘s next for the case?
The U.S. has been trying to extradite Meng from Canada since 2018. The case has led to increased diplomatic tensions between China and the U.S., as well as with its close aly Canada.
Meng’s case was motivated by political reasons and tarnished the Canadian judicial system, Meng’s lawyer Richard Peck said, contending that she has been used by former U.S. President Donald Trump as a bargaining chip.
Although Trump has now lost the presidency at the ballot box, trade disputes between the U.S. and China have not ended. Therefore, the case is still under political influence, he said.
According to Reuters, committal hearings in Meng’s case are expected to finish this week, a step closer to bring the two-year-long legal wrangling to a close.
During the final hearing, Meng’s lawyers wrote a letter to the court stating that there has been “No deception. No loss. Not a plausible theory of risk” against HSBC.
In the coming days, Holmes, who is presiding over the case, will likely decide whether to recommend extraditing Meng to the U.S. before Canadian Justice Minister David Lametti makes the final call.
Both Holmes’ and Lametti’s decisions can be appealed, which legal experts say means the case could drag on for years.