Basic facts of the case

On December 1, 2018, Canada arrested Ms. Meng Wanzhou, Huawei’s Chief Financial Officer, in Vancouver at the request of the US. On December 11, 2018, the Supreme Court of British Columbia in Canada ruled on and approved Ms. Meng’s bail application.

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On January 29, 2019, the US formally requested Canada extradite Meng Wanzhou to the Eastern District of New York for prosecution.

Ms. Meng submitted that the alleged conduct she is being prosecuted for in the US cannot amount to fraud in Canada, because the proposed prosecution is, in essence, an enforcement of US sanction laws against Iran, measures that are not part of Canadian law, and which, indeed, Canada has expressly rejected. She also argued, legally speaking, the “double criminality” standard stipulated in Canada’s Extradition Act has not been met. Therefore, she requested an order to stay the extradition proceedings.

The Attorney General of Canada has put forward that: (1) it is appropriate for the Canadian court overseeing Ms. Meng’s extradition to take the US’s sanctions against Iran into consideration as they are contextual material relevant to inform the background of the allegation, and (2) even if the sanctions were not taken into consideration, Ms. Meng’s alleged actions would still constitute fraud under Canadian law.

Canada’s Extradition Act stipulates that the requesting state has 60 days to make the extradition request following the provisional arrest. After that, the Canadian government has 30 days from when they receive an extradition request to decide whether to issue an authority to proceed. On March 1, 2019, the last day before the deadline, the Canadian Ministry of Justice signed the authority to proceed, which formally commenced Meng’s extradition process. The Canadian Minister of Justice and the Litigation Authority stated they signed this order as they believed that Ms. Meng’s alleged behavior was equivalent to fraud and violated Section 380(1)(a) of Canada’s Criminal Code[i]. The Attorney General would therefore be required to prove during Ms. Meng’s extradition hearings that, if Ms. Meng’s alleged acts took place in Canada, they would constitute fraud.

The extradition request the US submitted to Canada had been filed in accordance with Section 33 of Canada’s Extradition Act[ii]. It included a Record of the Case (ROC) and two Supplemental Records of the Case (SROCs). Such records are intended to contain all relevant information on the charges being brought against Ms. Meng.

The ROC and SROCs stated that:

Diplomatic relations between the US and Iran had been severed in 1980, following the November 1979 Iran hostage crisis. At that time, the US began to impose various sanctions on Iran, including oil embargoes, a blanket trade ban between Iran and the US, and a prohibition on Americans from traveling to or engaging in investment operations or financial transactions in Iran.

The Clinton administration continued to sanction Iran with the Iranian Transaction Regulations (ITR) in 1995 and the Iranian Sanctions Act (ISA) in 1996. Both the ITR and ISA have since become a critical part of US sanctions on Iran.

During the George W. Bush administration, several departments under the US Treasury were integrated to form the Office of Terrorism and Financial Intelligence (“TFI”). The infamous Office of Foreign Assets Control (“OFAC”) is also part of the TFI and serves as the main enforcement agency of US economic sanctions. According to ITR and ISA, banks must obtain OFAC authorization before providing financial or credit services to entities in Iran through the US. Otherwise, they will violate the regulations, which may lead to criminal and civil punishments. As of December 2015, US branches of foreign banks have paid a total of US$14 billion in fines to the US government for violating US sanctions. Under such a policy, transnational companies from all over the world, especially financial institutions, have all began to realize that compliance with sanctions is a very important part of regulatory compliance.

HSBC had previously violated US sanctions against Iran and other countries, resulting in the bank signing a deferred prosecution agreement (DPA) with the US Department of Justice in December 2012. Under this DPA, HSBC agreed to stop any violation of the sanctions, adopt various remedial measures, and pay a fine of more than US$1 billion.

But a banking relationship between Huawei (and its subsidiaries and affiliates) and HSBC (and its subsidiaries in the US) existed at least from 2007 to 2017. During this period, HSBC processed the following major transactions for Huawei and its subsidiaries and affiliates. From 2010 to 2014, HSBC US completed a large number of transactions in US dollars for Huawei entities. In August 2013, HSBC coordinated a syndicated loan to Huawei in an amount equivalent to US$1.5 billion and was one of the principal lenders in that transaction. In April 2014, HSBC issued a commitment letter to Huawei outlining the terms of a proposed US$900 million credit facility. In July 2015, HSBC was one of the members to extend a US$1.5 billion syndicated loan facility to Huawei.

In December 2012, Reuters reported that Skycom had offered to sell US-made computer equipment to Iran’s largest telecommunications equipment manufacturer, thereby violating US sanctions. The article reported that Huawei and Skycom “have very close ties”. In January 2013, Reuters reported that there were various ties between Huawei and Skycom. These include: Ms. Meng served on the board of directors of Skycom from February 2008 to April 2009; she served as the corporate secretary of a Huawei subsidiary in 2007, which wholly held Skycom; Huawei called Skycom one of its “major local partners” in Iran.

Following that, HSBC made inquiries with Huawei about the Reuters reports. Several Huawei representatives denied the substance of the reports, and Ms. Meng asked to meet in person with the HSBC executive who was in charge of the bank’s Asia business.

The meeting was held in a back room of a Hong Kong restaurant on August 22, 2013. Ms. Meng spoke in Chinese, and an interpreter provided English translation for the HSBC executive. Ms. Meng also showed a PowerPoint presentation written in Chinese, and shortly after the meeting, she provided the English translation of the deck to the HSBC executive. During the meeting, she told the HSBC executive that Huawei’s business in Iran strictly abides by applicable laws and US sanctions, and stated that the relationship between Huawei and Skycom was a normal business partnership. Huawei required Skycom to pledge compliance with all applicable laws, regulations, and export control requirements. Ms. Meng said that Huawei was once a shareholder of Skycom, and she herself was a member of Skycom’s board, because at that time, these measures were necessary to manage Skycom as a business partner and strengthen and monitor its trade compliance. However, as Huawei sold all its shares in Skycom and Ms. Meng resigned from the Skycom board, it was not necessary to continue implementing these measures. Ms. Meng said that Huawei had business in Iran, but that business was conducted through a local subsidiary. Huawei’s subsidiaries in Iran and other countries would not conduct transactions with HSBC.

The HSBC Global Risk Committee held a meeting in London on March 31, 2014 to discuss reputation and regulatory issues related to Huawei and decided to retain Huawei’s business. In making this decision, the committee relied on the assurances that Ms. Meng gave at the August 2013 meeting. About a month after the committee’s decision, HSBC issued a letter describing the terms of the proposed US$900 million credit facility. About a year later, HSBC, together with other international banks, provided Huawei with a US$1.5 billion syndicated loan.

A few years before the August 2013 meeting, Huawei had sold its shares in Skycom and Ms. Meng also stepped down from Skycom’s board. Despite this, Huawei still continued to control Skycom as well as its banking business and business operations in Iran. Skycom employees used Huawei email addresses and badges, and some of them even used Huawei stationery. The director and bank account signatory of Skycom were all Huawei employees. Though Skycom was acquired by Canicula, this could not be achieved without financing from Huawei and Canicula’s banking business and business operations were also under Huawei’s control.

The information about the true relationship between Huawei and Skycom was crucial for HSBC to decide whether to continue treating Huawei as a client.

Therefore, Ms. Meng was being charged in the US with misrepresenting the relationship between Huawei, and Skycom to HSBC, causing HSBC to violate the DPA and US sanctions, and thus face the risk of economic deprivation, reputational losses, and punishment.

While new evidence has brought many of the assertions made by the US in the ROC and SROCs into question, these were the facts used by the Canadian court and Ministry of Justice to determine whether a prima facie case had been established.

Legal basis for extradition

The history of extradition can be traced back to ancient times. Before the end of the 18th century, the objects of extradition were mainly rebels, deserters, and heretics. A king or other such ruler would decide whether to extradite a criminal found in their territory. Under modern systems of criminal law, principles such as legally prescribed crimes and presumption of innocence have greatly changed these extradition decisions into heavily regulated judicial activities. Most extradition systems used around the world today can trace their roots back to Belgium’s Extradition Law Outline, which was enacted on October 1, 1833. The United Kingdom’s Extradition Act of 1870 was the first of its kind to stipulate strict extradition procedures.

Today, extradition is generally based on extradition treaties between countries. Extradition treaties are usually bilateral, such as the extradition treaties signed by Canada and the US in 1971, and by the UK and the US in 1972. These kinds of bilateral treaties create obligations for mutual extradition between two countries. Examples of multilateral extradition agreements include the Inter-American Convention on Extradition (1993) and the European Convention on Extradition (1952). Other types of international treaties often have provisions related to extradition as well. Such clauses can be found in many important treaties, including the Treaty of Versailles (1919), the Berlin Declaration (1945), the Paris Peace Treaties (1947), the Genocide Convention (1948), the Hague Hijacking Convention (1970), the Hostages Convention (1979), the Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation (1988), the Protocol for the Suppression of Unlawful Acts against the Safety of Fixed Platforms Located on the Continental Shelf (1988), the Terrorist Bombings Convention (1998), and the Terrorist Financing Convention (2000).

However, the extradition clauses stipulated in these international treaties do not require compulsory extradition. Instead they give the option for the requested state to either extradite or prosecute on their own. Treaties, especially bilateral treaties, are the primary basis for extradition. In the absence of an extradition treaty, a country has no obligation to extradite. Whether or not a country without an extradition treaty will comply with an extradition request is completely left to the country’s discretion.

Conditions and procedures for extradition

In the international community, extradition is normally only considered if the person sought has committed acts that would be considered a crime punishable by imprisonment under the laws of both the requesting state and the requested state. This is called the “principle of identity” or the “principle of double criminality”. Alternatively, specific extraditable crimes can be stipulated in the two states’ extradition treaty. Generally, the crimes that fall under this category are common criminal offenses, war crimes, hijacking, piracy, drug trafficking, and violent terrorism. Minor offenses typically do not meet the conditions for extradition. Some extradition treaties also include provisions under which they would be exempt from complying with an extradition request. For example, a requested state may decline to extradite one of their citizens who committed a crime, if the citizen could not be sentenced under the law of the requested state, for example because the statute of limitations has already passed, or if the requested state has already sentenced the citizen or has decided not to prosecute the citizen. Extradition requests for political prisoners, or those being tried for religious and military crimes (such as deserters) are usually declined.

Requests for criminal extraditions are generally handled through diplomatic channels. When the requesting state submits an extradition request, it is transmitted by a diplomatic or consular representative to the national government of the requested state, together with proof of a crime. After the requested country agrees to extradite the criminal in question, it sends a surrender notice to the requesting country, informing them of the time and place where they will surrender the offender. The requesting country must accept these transfer arrangements within a certain period of time. Extradition is an important part of international judicial assistance and an important part of how countries effectively exercise jurisdiction and sanction crime.

Double criminality principle

The double criminality principle, also known as the principle of identity, means that an extraditable crime must be an act that both the country requesting extradition (the US) and the country requested (Canada) consider to be criminal.

Extradition between Canada and the US also follows the principle of double criminality. If this principle is not met, the requested country will not honor an extradition request. This principle is also recognized by the international community as the core of standard extradition law. This principle is derived from the basic principle of reciprocity.

Section 3(1) of Canada’s Extradition Act stipulates: A person may be extradited from Canada in accordance with this Act and a relevant extradition agreement on the request of an extradition partner for the purpose of prosecuting the person or imposing a sentence on or enforcing a sentence imposed on – the person if … (b) the conduct of the person, had it occurred in Canada, would have constituted an offence that is punishable in Canada, (i) in the case of a request based on a specific agreement, by imprisonment for a maximum term of five years or more, or by a more severe punishment, and (ii) in any other case, by imprisonment for a maximum term of two years or more, or by a more severe punishment, subject to a relevant extradition agreement.

Section 29(1) stipulates: A judge shall order the committal of the person into custody to await surrender if (a) in the case of a person sought for prosecution, there is evidence admissible under this Act of conduct that, had it occurred in Canada, would justify committal for trial in Canada on the offence set out in the authority to proceed and the judge is satisfied that the person is the person sought by the extradition partner.

These regulations establish double criminality must be determined to a hearing before a person is either extradited or directly prosecuted.

It should be noted that, before all else, the double criminality standard must be met before it can be decided if Ms. Meng should be extradited to the US. The court overseeing Ms. Meng’s hearings and the Canadian Minister of Justice ultimately need to determine: if Ms. Meng’s actions are considered fraudulent under Canadian law; if the US’s Iran sanctions are relevant to Canadian law; if there was an abuse of process in Canada; if such abuse violated Ms. Meng’s Charter rights; if the US actually has jurisdiction over Ms. Meng’s case; and, finally, if the arrest of Ms. Meng is an attempt to create a bargaining chip in China-US trade negotiations?

[i] Section 380(1)(a) of the Canadian Criminal Code: Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service, (a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding fourteen years, where the subject-matter of the offence is a testamentary instrument or the value of the subject-matter of the offence exceeds five thousand dollars.

[ii] Extradition Act, S.C. 1999, c. 18, Record of the Case, 33 (1) The record of the case must include (a) in the case of a person sought for the purpose of prosecution, a document summarizing the evidence available to the extradition partner for use in the prosecution; and (b) in the case of a person sought for the imposition or enforcement of a sentence, (i) a copy of the document that records the conviction of the person, and (ii) a document describing the conduct for which the person was convicted. Other documents — record of the case, (2)  A record of the case may include other relevant documents, including documents respecting the identification of the person sought for extradition. Certification of record of the case: (3) A record of the case may not be admitted unless (a) in the case of a person sought for the purpose of prosecution, a judicial or prosecuting authority of the extradition partner certifies that the evidence summarized or contained in the record of the case is available for trial and (i) is sufficient under the law of the extradition partner to justify prosecution, or (ii) was gathered according to the law of the extradition partner; or (b) in the case of a person sought for the imposition or enforcement of a sentence, a judicial, prosecuting or correctional authority of the extradition partner certifies that the documents in the record of the case are accurate. Authentication not required (4) No authentication of documents is required unless a relevant extradition agreement provides otherwise. Record of the case and supplements, (5) For the purposes of this section, a record of the case includes any supplement added to it.

Posted by Prof. Dr. Gangfang LIU

Associate Professor and Supervisor of Graduates, School of Law, University of International Business and Economics. He teaches and publishes extensively on International Commercial Law, Company Law, Economic Law, International Investment Law, Intellectual Property Law, and Law of Salvage at Sea. He is the member of Chinese Society of International Economic Law and China Maritime Law Association, and provides legal training and consultation to many central SOEs and foreign invested corporations.

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