The world’s largest telecommunications-equipment company, China’s Huawei, is suing the US government. But the suit isn’t just about US law. It’s part of Huawei’s larger campaign to defend its role as a global provider of telecom gear amid fears that its technology is or could be used by the Chinese government for spying. In essence, Huawei is challenging the US government to prove its suspicions.
Last year President Donald Trump signed a defense spending bill that banned government agencies from buying gear from Huawei and fellow Chinese telecom giant ZTE, and from doing business with companies that use the two companies’ technology. Government pressure had already effectively barred China from the US market over concerns that it could build backdoors into its products or hand over information about security bugs that China could use to attack US telecom networks. The US also has been pressuring its allies around the world to stop doing business with the company. Australia, for example, has effectively banned carriers from using Huawei’s gear to build 5G networks, and other countries, including Japan, have also cracked down on the company.
In a press conference in January, Huawei founder Ren Zhengfei said the company has not and would not spy for the Chinese government. “I support the Communist Party of China, but I will never do anything to harm any other nation,” he said, according to The Wall Street Journal.
Huawei filed suit against the US on Wednesday arguing that last year’s defense bill unfairly bans only Huawei and ZTE, while other companies that manufacture their equipment in China are not. It also alleges that the ban violates the US Constitution’s separation of powers and violates the company’s rights of due process.
“They have a shot, but it’s a longshot,” says Julian Ku, a professor of law at Hofstra University. “It’s a very tough row to hoe to overcome Congress’ management of who can get federal contracts.”
But Huawei might not have to win the suit to benefit. The lawsuit is a way for it to push back against one of the core accusations against it. It’s a chance for the company to defend its reputation in court and to challenge the US government to provide evidence of its suspicions.
“I think it’s a PR move for them,” says mobile industry analyst Chetan Sharma. “It’s about signaling to other countries that might be on the fence about doing business with Huawei that Huawei is a safe partner.”
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The company’s reputation has taken a beating over the past year. CFO Meng Wanzhou, Ren’s daughter, was arrested in Canada over US allegations that the company violated US sanctions against Iran. The US Department of Justice announced charges against Meng and the company in January, and also indicted the company for stealing intellectual property from T-Mobile. A Huawei employee was also arrested in Poland on espionage charges.
Huawei has long had to contend with accusations that it could be used by China for espionage or sabotage, says Kevin Allison of the political risk-consulting firm Eurasia Group. “But those concerns have started to morph in recent weeks,” he says. “The US government is now saying ‘They steal intellectual property and flaunt US law.'”
Allison sees the lawsuit against the US government as part of a broader push by the company to present a counter-narrative. At Mobile World Congress in Barcelona last month, Huawei Chair Guo Ping talked up information leaked by Edward Snowden that the National Security Agency had planted its own backdoors in equipment from Huawei as well as Western companies like Cisco. Huawei also commissioned legal reviews by the law firms Zhong Lun in Beijing and Clifford Chance in London that concluded the Chinese government can’t force Huawei to help it conduct cyberattacks. And Meng filed suit this month in Canada alleging that her arrest violated her rights.
“It’s about signaling to other countries that might be on the fence about doing business with Huawei that Huawei is a safe partner.”
Chetan Sharma, telecom analyst
It hasn’t been all bad news for Huawei. The head of the UK’s intelligence agency signaled last month the agency wouldn’t ban Huawei outright. Likewise, a German government spokesperson told CNBC that the country wasn’t ready to ban Huawei. On Thursday the German government announced new security requirements for mobile networks that apply to all vendors, not just Huawei or Chinese companies. Sharma says losing access to Germany would have been a major blow to Huawei.
Even if Huawei’s suit is more about perception than gaining access to the US market, it’s possible that the company could win in court. Ku says that Huawei’s due process claim is its weakest. “Due process is for fundamental rights, and you don’t have a fundamental right to do business with the federal government,” he says. Likewise, the separation of powers claim is on shaky ground. Where Huawei has the best chance of winning is its claim that the law impermissibly singled out the company.
Last year a federal judge dismissed a similar suit filed by Russian information-security company Kaspersky Lab after it was banned from government contracts. Ku says Huawei will argue that this case is different because the US government isn’t just banning government agencies from doing business with Huawei, but also blocking agencies from doing business with users of the company’s gear.
“It’s a novel enough issue that it will go to appeal,” Ku says. “There will be quite a bit of litigation.”