Image Courtesy: Los AnglesTimes
Introduction
The arrest of Ms. Meng Wanzhou (also known as Sabrina Meng and Cathy Meng) – the Chief Financial Officer (CFO) cum Deputy Chairwoman of the Huawei Board and also the daughter of the founder of Huawei and heir-apparent to Chairmanship of Huawei – on Dec. 1, 2018 {coincidentally the same day Trump met with Chinese President Xi Jinping on the sidelines of a G20 meet in Buenos Aires to call a truce over their trade war} at Canada’s Vancouver International Airport while in transit from China to South America, and her subsequent release the past week, after nearly three years, have multiple aspects to consider.
Over the centuries, the propensity of the Chinese Emperors to punish their immediate and even far-away neighbours for supposed acts of transgressions against Chinese interests is well known and documented. In the 14th Century, Admiral Zheng He arrested and took away to China some of the demurring rulers from distant lands, during his various voyages, to make them pay obeisance to the Ming Emperor and agree to be tributary states to China.
As the saying goes – “the more it changes, the more it remains the same” – the Chinese approach to governance and international relationship, though modernized according to the diktats of changing times, has essentially remained the same as they were over millennia. These are indelible markers of Chinese state behaviour and are what Xi Jinping euphemistically refers to as ‘Chines Characteristics’. Among other such strategic vestiges of China, we continue to see, for example, an imperial form of governance domestically within China, though there is a political party in the form of the Chinese Communist Party (CCP), a Politburo the oversees CCP’s activities, a Parliament in the form of the National People’s Congress (NPC), and a council of ministers in the form of a State Council. In international relationships too, we continue to witness China’s medieval ideas of swift and disproportionate punishment of various forms in order to gain favorable positions for China or to extricate itself from difficult situations.
We will see in this article how this played out in the dramatic end to the case of Ms. Meng this past week.
What is the case?
Ms. Meng was arrested while transiting flights at Vancouver from China to Mexico on an arrest warrant issued in New York on August 22, 2018 and since then she had been undergoing extradition trials until recently, when she was dramatically released on September 23, 2021 roughly a month before the pronouncement of judgement on her extradition to the US.
The US claims that the CFO of Huawei (founded c. 1987) deliberately and knowingly misled the Americans, personally in her capacity in the period between 2009 and 2014 by falsely claiming that a Huawei subsidiary, SkyCom, located in Hong Kong and dealing with Iran, was a separate company while it was not so, thus violating the UN and US sanctions on Iran. This violation is said to have occurred at a meeting between Meng and an HSBC bank official in Hong Kong teahouse on August 22, 2013 where she made a PowerPoint presentation intended to allay HSBC’s concerns on Huawei’s Iran dealings. The US claims that SkyCom was a mere shell company of Huawei. Meng was on the board of SkyCom during that period when it sold banned Hewlett-Packard products to Iran. It is alleged that in the meeting Ms. Meng misled HSBC over the true nature of Huawei’s relationship with Skycom and this, in turn, put the bank at risk of violating sanctions against Iran. The sanctions against Iran, imposed in December 2006, were relaxed only in c. 2015 after Iran and P5+1 struck a long-term deal (JCPOA, Joint Comprehensive Plan of Action). Skycom had offered to sell at least €1.3 million worth of embargoed Hewlett-Packard computer equipment to Iran’s largest mobile phone operator in 2010. At least 13 pages of Skycom’s proposal were said to be marked “Huawei confidential” and carried Huawei’s logo.
On January 28, 2019, the US Department of Justice (DoJ), had filed criminal charges against Huawei Technologies Co. and its chief financial officer Ms. Meng Wanzhou, in a Brooklyn court, accusing her of fraud and conspiracy including committing wire fraud, breaking confidentiality agreements, and violating sanctions against Iran. The Trump administration reimposed sanctions on Iran unilaterally in November 2018, but the case in point pertains to the previous UN/US/EU sanctions regime against Iran during Barack Obama’s presidency.
Simultaneously, another charge-sheet was filed in a Seattle court against Huawei for stealing trade secrets, conspiracy, and obstruction of justice for stealing from an American company, T-Mobile, a part of a robot (the arm) meant for automatic testing of mobile phones. Reacting immediately, China said the “unreasonable crackdown” on Huawei should be stopped and the extradition request dropped by the U.S., adding that Beijing would “firmly defend” its companies. This paper does not discuss the separate Huawei issues which continue.
The US had to request Ms. Weng’s arrest in another country as the US has no extradition treaty with China and the US claims that Meng has been carefully avoiding US ports of call after coming to know of US criminal proceedings.
After her arrest, Meng Wanzhou sued the Canadian government in March 2019 for arresting her claiming that instead of immediately arresting her, authorities interrogated her “under the guise of a routine customs” examination and used the opportunity to “compel her to provide evidence and information”. The deadline for a formal request by the country requesting extradition must be received by Canada within sixty days from the arrest. Once a formal request is received, a Canadian court must determine within 30 days if there is sufficient evidence to support extradition, and Canada’s Minister of Justice must give a final formal order. Though Meng doesn’t live in Vancouver permanently (she lives in Shenzhen), her husband {a venture capitalist named Xiaozong Liu} lives there and she has two houses there used for summer vacation. China had been provided with consular access to Ms. Meng by the Canadians. In the meanwhile, Ms. Meng was given a C$10 million bail but was put under partial house arrest in one of her own houses.
On March 2, 2019, the Department of Justice, Canada initiated the extradition proceedings through a public announcement, after receiving a formal request from the US Court within the stipulated period. On June 6, 2019, the British Columbia Supreme Court in Canada set the formal extradition case to begin on January 20, 2020, with the last hearings scheduled for October 2020. Extradition from Canada requires that the alleged overseas offence would also have been a crime had it been committed on Canadian soil, the ‘double criminality’.
On May 27, 2020, a judge of the British Columbia’s Supreme Court determined that the US fraud charges against Meng satisfied the Canadian extradition requirement of “double criminality”, that is the accused has done something that constitutes a crime both in Canada and the USA. Ms. Meng’s lawyers had argued that violating US sanctions against Iran was not a crime in Canada. However, the Judge rejected this on two counts. One, Ms. Meng “making intentionally false statements in the banker client relationship that put HSBC at risk”. Two, “The US sanctions are part of the state of affairs necessary to explain how HSBC was at risk, but they are not themselves an intrinsic part of the conduct. For this reason, I cannot agree with Ms Meng that to refer to US sanctions in order to understand the risk to HSBC is to allow the essence of the conduct to be defined by foreign law. Canada’s laws determine whether the alleged conduct, in its essence, amounts to fraud”, said the Judge.
On February 25, 2021, Ms. Weng filed a case in a Hong Kong court requesting HSBC to release all internal documents relating to its compliance evaluation relating to Huawei and Skycom Tech, the unit used by the Chinese telecommunications company in its business dealings with Iran from December 2012 to April 2015. This followed a rejection for the same access filed against HSBC at a London Court by Ms. Meng’s lawyers in mid-February 2021 under the Bankers Book Evidence Act to access relevant information kept in HSBC’s books. Her argument has been that HSBC was all along aware of the Iran deal and she did not mislead the bank. On April 12, 2021, an HSBC spokeswoman said in Hong Kong that an agreement has been reached between HSBC and Ms. Meng’s lawyers for access to the documents and the same has been approved by a Hong Kong court.
In the meanwhile, the extradition proceedings in the Canadian court (Supreme Court of British Columbia) were set to conclude in May 2021. In late March 2021, Ms. Meng’s lawyers argued in the Canadian court that US Laws were not applicable in China, Meng was a Chinese citizen and HSBC, a British bank. This is the fourth line of argument by Meng’s lawyers while the other three have been: political prosecution meant as leverage by the US in its trade war with China, the Canadian police conducted a covert operation on Canadian soil to help the American FBI, and the USA has misled the Canadian court. The argument by Meng’s lawyers, therefore, was that the US case was politically tainted by former US President Donald Trump and others to help the Americans win a trade war with China; that Meng’s Canadian Charter rights were violated by police and border officers; that US authorities misled the Canadian court with “manifestly unreliable” records of the case; and that the prosecution is contrary to international law. Countering these, the Government lawyer said that the Canadian Court cannot judge whether the USA had jurisdiction in Hong Kong or not as it was for the US courts to decide on that matter. They further argued that the Canadian Laws are clear that it was for the Canadian Minister of Justice to decide whether she should be extradited or not. It was an executive task, not a judicial one.
On August 19, 2021, Ms. Meng’s extradition trial hearings ended in the Canadian court in the Supreme Court of British Columbia at Vancouver. Associate Chief Justice Heather Holmes adjourned the hearing by saying she would hold a case management conference by phone on October 21, at which time she would announce a date for rendering her ruling.
However, the Meng case ended dramatically on September 24, 2021, when the Canadian court discharged her after the Canadian government lawyers asked the court to withdraw the authority to proceed in her case and discharge her after Meng reached a deal with US prosecutors earlier the same day that ended their bank fraud case against her. The US Justice Department said that same day that it has reached a ‘deferred prosecution agreement’ with Meng, that would avoid a trial and move toward defusing a case. Meng, who agreed to a statement of facts in the case wherein she did admit to providing “knowingly false statements” in the case but did not plead guilty, will see the felony fraud charges against her dropped on December 1, 2022, if she abides by the agreement. Under a deferred prosecution agreement, the government agrees to refrain from prosecuting a defendant for a period of time and drops the case altogether if the defendant complies with specified conditions. The deferred prosecution agreement pertains only to Meng and US charges against the company remain.
During the entire period, the Chinese government stood solidly behind Ms. Meng and Huawei. The Chinese consistently denied that there was any wrongdoing on their part. The Chinese Ambassador to Canada Ambassador Lu Shaye said at a press event at the embassy in Ottawa that the previous month’s arrest of Huawei Technologies executive Sabrina Meng Wanzhou was an act of “backstabbing” by a friend. The initial references to Canada were a mix of anguish and friendliness but they took an uglier tone as weeks went by. Aggressive actions against Canada followed swiftly. Reacting in the social media, the Chinese Government later accused Canada of being a partner in crime with the USA, “The purpose of the United States is to bring down Huawei and other Chinese high-tech companies, and Canada has been acting as an accomplice of the United States.” The semi-official Global Times launched an online petition demanding Meng’s immediate and unconditional release. In May 2020, China accused HSBC of helping the Americans with inside information in this case, bringing pressure on a bank that does substantial business out of Hong Kong though the Headquarters had shifted to the UK. During US Deputy Secretary of State Wendy Sherman’s July 2021 trip to China, Chinese Vice-Foreign Minister Xie Feng insisted that the US drop its extradition case against Meng. He is also said to have given ‘two lists’ of China’s negotiating positions with the US on all its disputes and the Meng case figured in one of them. The release of Ms. Weng clearly flows from these diplomatic negotiations. Ms. Meng left Canada the same day she was released, in a chartered flight arranged by the Chinese government. Upon stepping out of the plane in a symbolic red dress at Shenzhen airport, Meng said, “President Xi Jinping cares about the safety of each and every Chinese citizen, including me. I also thank the relevant departments for their support and help. They have resolutely safeguarded the legitimate rights and interests of Chinese enterprises and citizens. The motherland provides us the strongest backing”.
China’s Immediate Punishment Tactics
China has used several forms of coercion in its international relations, and these include diplomatic, military, economic and political. It has employed a judicious mix of these forms of coercion depending upon the exigencies of circumstances. In its employment of these coercive tactics, it does not bother about violating international laws and/or norms because it knows that resolution of such disputes at international bodies take a long time and by that time China could do enough damage. For example, the resolution of trade disputes by the WTO takes anywhere between three and five years.
China has been regularly using all forms of coercion against India. The 1959 incident at Hot Springs involving India’s CRPF, the 1962 war, the 1967 Nathu La incident, the 1986-87 Sumdorong Chu incident, the various trespasses into Indian territory in Ladakh, the 2017 Doka La incident and the series of violent incidents in Ladakh in 2020, and the proliferation to Pakistan of nuclear weapons and their delivery systems that can target only India are examples of military coercion. The constant claims over Ladakh, Arunachal Pradesh, the objection every time the President or the Prime Minister visits Arunachal Pradesh or meets exiled-Tibetan delegations, opposition to India becoming a permanent member of the UNSC or mothballing India’s resolutions regarding terrorism, stalling India from becoming a member of various world bodies are examples of diplomatic coercion. Its regular employment of abusive language against India in the Chinese government and Party media and subtle propaganda through Indian media are examples of political coercion. Refusing to open up the Chinese market for Indian products, and services, cyber-attack on the Mumbai power grid, and deliberate business practices to target the Indian drug industry, for example, are acts of economic coercion. During the Doka La crisis of 2017, China abruptly stopped sharing the hydrological data in the Brahmaputra River, a river that is usually in spate during this time. This blindsided India and over 3 million Assamese were left stranded and 130 killed in floods in the Brahmaputra about which India had no warning. In March 2021, after the first QUAD apex meeting, China imposed an unofficial ‘ban’ on the entry of ships with Indian sailors on them, leaving many ships stranded for months without being able to dock at Chinese ports.
There are many other instances with other countries. In 1995, China launched a massive barrage of missiles across the Taiwan Straits to terrorize Taiwan because its President was given a visa to visit the USA. China was restrained only after the US Seventh Fleet steamed into the Taiwan Straits. In 2010, China banned exports of ‘rare earths’ to Japan following the detention of a Japanese fishing trawler captain who was not only found fishing in Japanese territorial waters at Senkaku but who also rammed his trawler against the Japanese Coast Guard vessel. China blocked Philippines ’ banana exports in c. 2012 after a flare-up in tensions in the South China Sea on the Scarborough Shoal issue, on the supposed grounds of food safety. It has also taken advantage of its size by encouraging boycotts—urging Chinese consumers, for example, not to patronize a South Korean department store chain, Lotte, in an attempt to dissuade Seoul from deploying the THAAD missile system in South Korea. In 2020, in response to Australia’s calls for an investigation into the source of the pandemic, China slapped tariffs and trade bans on Australian coal, timber, wine, seafood, and other products. Its attempt to interfere politically in Australia are under investigation.
The Chinese Retaliation after Meng’s Arrest
As soon as the arrest was made, China stepped up its attacks on Canada. On January 18, 2019, China’s ambassador to Canada, Lu Shaye, warned the Canadian government to stop recruiting international support in its feud with China and threatened retaliation and repercussions if Ottawa bans Chinese telecommunications giant Huawei from its new 5G network for security reasons. This is how a totalitarian China abuses the avenue of freedom of expression available freely in democratic countries. It is not possible for diplomats of other countries in China to ‘warn’ her similarly in Beijing.
The retaliation against Canada was swift. Within a week, Canada’s ex-diplomat and North Korea specialist Michael Kovrig, who now works with International Crisis Group [ICG] as its North East Asia Senior Adviser, was detained in China on 7th December 2018 {date is not clearly known because he simply disappeared one day} on accusations of harming national security. A few days later, China arrested Michael Spavor, an entrepreneur specializing in business with North Korea and Sarah D. McIver, a Canadian teacher for ‘working illegally’. However, Sarah McIver was released within a few weeks. The Chinese police have powers to hold an accused in their custody for 37 days without access to any legal assistance by the accused. In early 2019, China halted canola imports from Canada and suspended pork imports as well. Later, Beijing also refused to allow the Canadian trade delegation to visit China. China also targeted the Canadian luxury brand Canada Goose by boycotting its stores in China. On May 16, 2019, the day that Trump signed the executive order leading to banning of Huawei, China formally charged Kovrig and Spavor. In early January 2019, the Chinese court-imposed the death penalty on a convicted Canadian drug smuggler, Robert Schellenberg (arrested in c. 2014), who had earlier been sentenced to 15 years. However, a retrial was ordered suddenly after the Huawei case happened and based on ‘fresh evidence’, the sentence was enhanced to death. In August 2021, the death sentence was ‘confirmed’ by a higher court.
In May 2019, Michael Kovrig, a former diplomat who was detained while visiting Beijing, was charged with “gathering state secrets and intelligence for abroad,” while Michael Spavor, a business consultant who was detained in northeast China, was accused of “stealing and providing state secrets for abroad,”. The timing of their charges uncannily coincided with the US ban on Huawei. On June 19, 2020, the Chinese Public Prosecutor said that a public prosecution for gathering state secrets and intelligence had been initiated against Kovrig in the Second Branch Court of the People’s Procuratorate of Beijing while Spavor was being prosecuted by the Dandong Procuratorate in Liaoning province for stealing and providing state secrets to foreign countries. This announcement by China came three weeks after Meng lost her legal bid to prevent being extradited to the US. On the day, the Canadian Court at Vancouver started its final courtroom process of ‘committal hearings’, a Chinese court announced that it had convicted Canadian Michael Spavor of espionage and sentenced him to 11 years jail.
The two Michaels, Kovrig and Spavor were released simultaneously by China along with Canada’s release of Meng Wanzhou. China continues to deny that the two Michaels were arrested as an act of retaliation and even more so that they were released in a quid-pro-quo. It would be interesting to know under what provisions of the Chinese law were the two Canadians released! Speaking after Ms. Meng’s release, the Chinese Foreign Ministry spokeswoman said the charges against Ms. Meng were fabricated and it was a ‘political persecution. She did not comment on what the charges against the two Michaels were!
Conclusion
The foregoing clearly traces the contours of Ms. Meng’s detention in Canada, the lawful proceedings therein, and the retaliatory and predatory practice of China which seem ultimately to have secured her release. A study of Chinese strategic thought processes is important to understand their behaviour. Such a Chinese strategic thought process is not based entirely on Confucius or Sun Tzu alone but also on a lot of Chinese culture as well. Of course, China employs the ideas of ‘neo realism’ which emphasizes such concepts as ‘comprehensive national power’ (CNP) etc. but they also employ ideas borrowed from their culture such as pragmatism and classical old school realism. These have been displayed in ample measures in the present case also though Global Times says that it was China’s national power that shaped this final result. The totalitarian Chinese also have more avenues to push their case, unlike democracies. Will Biden face another round of criticism now after the release of Ms. Meng, following the humiliating withdrawal from Kabul in August?
(Mr. Subramanyam Sridharan is a Computer Scientist by profession and distinguished member, C3S. His areas of interests include strategic and security studies, analysis of Indian Foreign Policy and has expertise in China, Pakistan, and Afghanistan. He has keen interests in Indian military affairs and has been a moderator for a leading web-based discussion forum. The views and opinions expressed in this article are those of the author and do not reflect the views of C3S.)
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