On May 28, 2020, in the case of United States v. Meng, 2020 BCSC 785, Associate Chief Justice Heather Holmes of the Supreme Court of British Columbia denied Wanzhou Meng’s request for an order discharging her from the extradition process on the basis that, as a matter of law, the “double criminality” requirement for extradition cannot be met.
The U.S. has requested her extradition for prosecution in the U.S. District Court in the Eastern District of New York for conduct that the Minister of Justice for Canada says corresponds to fraud in violation of section 380(1) of the Criminal Code of Canada.
The allegations concern the banking relationship between Huawei, a China-based telecommunications company, and HSBC, an international bank. Ms. Meng was and still is Huawei’s Chief Financial Officer, and the daughter of its founder, Ren Zhengfei. She alleged made false statements to HSBC in 2013, significantly understating Huawei’s relationship with Skycom Tech co. Ltd., a company based in Iran.
In August 2013, HSBC coordinated a syndicated loan to Huawei in an amount equivalent to US $1.5 billion, and was one of the main lenders. In April 2014, HSBC sent Huawei a signed letter describing negotiated provisions for a US $900 million credit facility. HSBC was one of the banks that loaned Huawei $1.5 billion in July 2015.
During this time U.S. Iran sanctions regulations required banks to obtain authorization from the U.S. Department of the Treasury’s Office of Foreign Assets control before providing financial or credit services through the U.S. to entities in Iran.
Before the incidents with Ms. Meng, HSBC had violated the sanctions and in December 2012 entered into a deferred prosecution agreement (DPA) with the U.S. Department of Justice, in which it agreed not to commit further sanctions violations, to undertake various remedial measures, and to undertake various remedial measures to pay forfeitures and penalties amount to well over a billion dollars.
In December 2012 and January 2013, Reuters published two articles associating Huawei with Skycom’s U.S.-related business dealings in Iran. The articles reported various connections between Huawei and Skycom, including that Ms. Meng served on Skycom’s board from February 2008 to April 2009, and that in 2007 she was company secretary for a Huawei holding subsidiary that, in turn, owned 100% of Skycom’s stock.
When HSBC inquired of Huawei about the reports in the Reuters articles, Ms. Meng gave an in-person meeting with a senior HSBC executive and showed a PowerPoint presentation. The U.S. indictment alleges that Meng made fraudulent statements to HSBC and that Huawei relied on the assurances provided by Ms. Meng at the August 2013 meeting in deciding to extend a proposed $900 million credit facility and subsequently participated with other international banks in a $1.5 billion syndicated loan to Huawei.
Justice Holmes disagreed with Ms. Meng that the conduct cannot amount to fraud because essentially the proposed prosecution is to enforce U.S. sanctions laws against Iran, measures that are not part of Canadian law and which Canada has expressly rejected. Meng argues that it is an artificiality to characterize the case as one of fraud against a bank, because the U.S. can have no real interest in policing private dealings between a foreign bank and a private citizen.
Meng contends that for Canada to extradite for conduct that does not violate its own laws and standards would not meet the rule of law and principles of fundamental justice. This includes those that prevent punishment for conduct not clearly prohibited by law.
Justice Holmes disagreed with Ms. Meng that to refer to U.S. 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.
According to Justice Holmes, Ms. Meng’s approach to the double criminality analysis would serious impair Canada’s ability to meet its international obligations in the extradition context for fraud and other economic crimes. The offense of fraud has a large potential scope. It may include a very wide scope of conduct, a large expanse of time, and acts, people, and consequences in multiple places of jurisdictions. Justice Holmes explains that Ms. Meng’s approach to the double criminality principle would give fraud an artificially narrow scope in the extradition context. It would entirely eliminate, in many cases, consideration of the reason for the alleged false statements and how such statements caused the victim(s) loss or risk of loss.
With respect to Ms. Meng’s concern that extraditing her would indirectly help to enforce laws based on policy offensive to Canadian values. The opinion explains that economic sanctions laws as were in place in the U.S. at the time of the alleged offense are not part of Canadian law, but they are also not fundamentally contrary to Canadian values. The opinion also notes that in the final phase of the extradition process the Minister of Justice must refuse a surrender order for extradition if such an order would be “unjust or oppressive” under all the relevant circumstances. The Minister’s decision will necessarily take account of whether prosecution according to the foreign laws could lead to an unjust or oppressive result according to Canadian values.
Justice Holmes concluded that, as a matter of law, the double criminality requirement for extradition is capable of being met in this case. The effects of the U.S. sanctions may properly play a role in the double criminality analysis as part of the background or context against which the alleged conduct is examined.
Future Proceedings and Implications
It is not known if Meng’s lawyers plan to immediate appeal the extraditability decision or wait until a later stage of the extradition process.
Meng and her lawyers are to appear in B.C. Supreme Court on June 3 for a case management conference, to schedule the next set of hearings.
Meng’s legal team plans to argue that her Charter rights were violated when she was arrested at YVR back in December 2018.
After the ruling the Chinese Embassy in Ottawa characterized “the whole case” a “grave political incident.”
Huawei expressed disappointment. It said it expects that “Canada’s judicial system will ultimately prove Ms. Meng’s innocence.”
After the ruling Meng will have to continue living under house arrest in Vancouver, where she owns two homes. While under a curfew and required to wear a GPS tracking device, she can still travel freely around the city.
The decision undoubtedly will further strain relations between Canada and China, which have deteriorated significantly since Meng’s arrest in December 2018. Meng’s verdict occurs during increasing frustration in Canada over the continued detention of Michael Kovrig and Michael Spavor, two Canadians who were seized in China shortly after Meng’s arrest.
A Chinese embassy spokesperson in Canada told the Canadian Broadcasting Company news: “The purpose of the United States is to bring down Huawei and other Chinese high-tech companies, and Canada has been acting in the process as an accomplice of the United States. The whole case is entirely a grave political incident.”
The current issue of the IELR will discuss the decision and implications in more detail.
 David Molko and Kendra Mangione, B.C. judge rules against Huawei’s Meng Wanzhou, extradition process continues, May 27, 2020 https://bc.ctvnews.ca/b-c-judge-rules-against-huawei-s-meng-wanzhou-extradition-process-continues-1.4956755.
 Amanda Coletta, Canadian court says extradition case can proceed, Wash. Post, May 28, 2020, at A18, col. 3.
 Leyland Cecco, Canada court ruling allows US extradition case of Huawei executive to proceed, The Guardian, May 27, 2020.