On December 1, 2018, Canadian authorities arrested Meng Wanzhou, the chief financial officer of Chinese telecom manufacturer Huawei, in Vancouver as she was going from Hong Kong to Mexico. Meng, who has been charged by the U.S. Department of Justice with crimes relating to violations of U.S. sanctions on Iran, is currently awaiting an extradition hearing in Canada. Her arrest has complicated efforts to reach a resolution to the ongoing U.S-China trade dispute while straining relations between China and Canada, which is seeking the release of several Canadians detained by China in apparent retaliation for Meng's arrest.
Meng was indicted under seal by a grand jury in the Eastern District of New York,Footnote 1 where a warrant for her arrest was issued on August 22, 2018.Footnote 2 When Meng's travel plans became known, the United States sought Canadian assistance, and she was arrested on December 1, 2018, as she was traveling through Vancouver International Airport.Footnote 3 Although U.S. officials did not initially disclose the precise nature of the charges against Meng, details of the allegations—including the fact that Meng potentially faces up to thirty years in prison—were revealed by an attorney for the Canadian Department of Justice during a hearing in which he asked the court to deny Meng bail as she fights extradition to the United States.Footnote 4
On January 28, 2019, the U.S. Department of Justice partially unsealed the indictment against Meng.Footnote 5 Also named in the indictment were Huawei and several of its subsidiaries.Footnote 6 In a press conference announcing the charges, Acting U.S. Attorney General Matthew Whitaker was joined by Secretary of Homeland Security Kirstjen Nielsen, Commerce Secretary Wilbur Ross, and a number of other senior government officials. Secretary Nielsen stated:
As charged in the indictment, Huawei and its Chief Financial Officer broke U.S. law and have engaged in a fraudulent financial scheme that is detrimental to the security of the United States … . They willfully conducted millions of dollars in transactions that were in direct violation of the Iranian Transactions and Sanctions Regulations, and such behavior will not be tolerated. The Department of Homeland Security is focused on preventing nefarious actors from accessing or manipulating our financial system, and we will ensure that legitimate economic activity is not exploited by our adversaries … .Footnote 7
Secretary Ross remarked:
For years, Chinese firms have broken our export laws and undermined sanctions, often using U.S. financial systems to facilitate their illegal activities … . This will end. The Trump Administration continues to be tougher on those who violate our export control laws than any administration in history … .Footnote 8
The thirteen-count indictment charges Meng with committing, among other crimes, wire fraud and bank fraud in connection with misrepresentations that Huawei made beginning in or around July 2007 about its dealings with Iran.Footnote 9 Under the Iranian Transactions and Sanction Regulations (ITSR), originally promulgated in the late 1990s by the Department of the Treasury's Office of Foreign Assets Control, the export of goods, technology, and services from the United States or by a U.S. person to Iran or the Iranian government is prohibited.Footnote 10 The ITSR also prohibit the provision of U.S. dollar-clearing services to Iran or the Iranian government.Footnote 11 According to the indictment, Huawei operated a corporation called Skycom:
as an unofficial subsidiary to obtain otherwise prohibited U.S.-origin goods, technology and services, including banking services, for HUAWEI’s Iran-based business while concealing the link to HUAWEI. HUAWEI could thus attempt to claim ignorance with respect to any illegal act committed by SKYCOM on behalf of HUAWEI, including violations of the ITSR and other applicable U.S. law.Footnote 12
By making false representations about its business dealings in Iran, the indictment charges, Huawei caused various “victim financial institutions” to inadvertently process millions of dollars in transactions for Huawei's business activities in Iran in violation of U.S. sanctions law.Footnote 13 The indictment alleges that Meng played a direct role in these misrepresentations by, for example, providing a PowerPoint presentation to an executive of a U.S. financial institution that falsely claimed that Huawei complied with all applicable U.S., United Nations, and European Union sanctions on Iran and that its relationship with Skycom constituted “normal business cooperation.”Footnote 14 Additionally, the indictment alleges that Skycom employed at least one U.S. citizen in Iran in violation of U.S. law, and that Huawei conspired to obstruct justice by relocating witnesses with knowledge of Huawei's operations in Iran to China and by spoliation of evidence.Footnote 15
Meng is currently awaiting an extradition hearing and has been released on bail on the condition that she stay at one of her homes in Vancouver, travel only within a limited range, and abide by a curfew.Footnote 16 Although a spokesman for the Chinese Foreign Ministry urged the United States to “immediately withdraw the arrest warrant against Miss Meng Wanzhou and stop making such kinds of extradition requests,”Footnote 17 the Canadian Department of Justice confirmed that it received a formal extradition request from the United States on January 28, 2019.Footnote 18 On March 1, Canada's Department of Justice issued an “Authority to Proceed” for the extradition,Footnote 19 and the extradition hearing is presently scheduled for May.Footnote 20
According to the terms of the U.S-Canada Extradition Treaty, which entered into force in 1976, both nations:
agree[] to extradite to the other, in the circumstances and subject to the conditions described in this Treaty, persons found in its territory who have been charged with, or convicted of, any of the offenses covered by Article 2 of this Treaty committed within the territory of the other, or outside thereof under the conditions specified in Article 3(3) of this Treaty.Footnote 21
Article 2 in turn incorporates a schedule annexed to the Treaty, which includes “[f]raud by a banker, agent, or by a director or officer of any company” among the listed offenses.Footnote 22 Article 8 provides that the decision whether to grant extradition shall be made according to the laws of the state to which the request for extradition is made.Footnote 23 Under Canadian law, if the courts determine that Meng can be extradited, the Canadian Minister of Justice may make a final determination whether to allow the extradition.Footnote 24 The entire process could span months or even years, as an adverse ruling may be appealed to the higher courts.Footnote 25
On the same day the indictment against Meng and Huawei was partially unsealed, a separate ten-count indictment against Huawei was also unsealed in the Western District of Washington.Footnote 26 Initially returned by a grand jury on January 16, 2019, the indictment charges Huawei and its U.S. affiliate with conspiracy to steal trade secrets, attempted theft of trade secrets, wire fraud, and obstruction of justice.Footnote 27 Huawei allegedly stole technology related to the “Tappy” robotic phone system developed by T-Mobile to test new phones before they are released into the product market.Footnote 28 The indictment also alleges that Huawei instituted a formal “bonus program” to encourage its employees to steal information from competing firms.Footnote 29 Globally, American officials are pressuring U.S. allies to ban Huawei, the largest manufacturer of telecommunications equipment in the world,Footnote 30 from their national infrastructure systems as part of what they view as a broader, technological arms race between the United States and China.Footnote 31
Meng's arrest comes at a delicate moment in U.S.-China trade relations.Footnote 32 In an apparent coincidence, Meng was arrested on the same day that Trump and Chinese President Xi Jinping were discussing trade over dinner on the sidelines of the G-20 Summit in Buenos Aires, Argentina.Footnote 33 Outwardly, American and Chinese officials have downplayed any connection between the two issues.Footnote 34 Responding to a question about the potential impact of Meng's arrest on the ongoing trade negotiations, a spokesman for the Chinese Foreign Ministry stated that “China and the US should follow the consensus reached by the two heads of state to step up consultations and reach a mutually beneficial agreement at an early date.”Footnote 35 Similarly, Robert Lighthizer, the U.S. Trade Representative, emphasized that “[t]his is a criminal justice matter. It is totally separate from anything that I work on or anything that the trade policy people in the administration work on.”Footnote 36 Canadian Foreign Minister Chrystia Freeland also portrayed Meng's arrest as a purely law enforcement matter:
[C]anada and the United States are countries with deeply shared democratic values. Those democratic values include the fact that in both countries, we have a deep regard for the rule of law and strong and independent judiciaries. I think that's one of the reasons that Canada and the United States, and both Canadians and Americans, feel comfortable with the existence of an extradition treaty between our two countries. And having said all of that, Canada is clearly of the view that extradition—the extradition process—is a criminal justice process. This is not a tool that should be used for politicized ends.Footnote 37
Trump, however, has not drawn as clear-cut a separation between criminal justice enforcement and trade negotiations. In an interview with Reuters, he suggested that he might be willing to intervene in Meng's case, stating, “Whatever's good for this country, I would do. If I think it's good for what will be certainly the largest trade deal ever made—which is a very important thing—what's good for national security—I would certainly intervene if I thought it was necessary.”Footnote 38
In contrast to the outwardly conciliatory tone adopted by American and Chinese officials, a piece in China's state-run People's Daily warned Canada of a “heavy price” for its detention of Meng.Footnote 39 Tensions between Canada and China escalated when, several days after Meng's arrest, the Chinese Ministry of State Security detained two Canadian citizens on “suspicion of engaging in activities that endanger national security.”Footnote 40 Both Michael Spavor, a writer and entrepreneur who operates cultural exchange tours to North Korea, and Michael Kovrig, a former Canadian diplomat and senior adviser at the International Crisis Group,Footnote 41 are reportedly under investigation for breaching a Chinese law regarding unregistered nongovernmental organizationsFootnote 42 and were further accused in March of the theft of state secrets.Footnote 43 Separately, another Canadian citizen, Robert Lloyd Schellenberg, was sentenced to death by a Chinese court on January 14, 2019, during a retrial on charges that he participated in a drug smuggling ring.Footnote 44 In response, Canadian Prime Minister Justin Trudeau stated, “It is of extreme concern to us as a government—as it should be to all our international friends and allies—that China has chosen to begin to arbitrarily apply a death penalty.”Footnote 45
