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Trade war

Huawei appeals US federal agency over 'unconstitutional' ruling

Move against FCC the latest in Chinese company's global legal and PR blitz

Huawei has sued the U.S. Federal Communications Commission for what it alleges is an 'unconstitutional' ruling    © Reuters

NEW YORK/ TAIPEI -- Huawei launched a second lawsuit against a U.S. government agency on Thursday as China's largest telecoms company stepped up its international legal and public relations offensive that seeks to convince the world that it does not represent a security threat.

The latest measure by Huawei seeks to overturn a decision last week by the U.S. Federal Communications Commission that labeled the company a "national security threat" and curtails the subsidized sale of Huawei products to rural U.S. customers.

"This prohibition violates the company's rights and violates laws that were enacted by Congress," Dennis Amari, director of U.S. government relations at Huawei, told the Nikkei Asian Review. "It definitely creates a stigma. Huawei is not going to be able to grow its business with the stigma hanging over it."

Huawei, which until this year had kept a low profile, has recently launched a slew of lawsuits around the world, including a defamation complaint in France and a court judgment against a Lithuanian newspaper. In February, it also threatened to sue the Czech government for saying its smartphones are not secure, according to The Wall Street Journal.

The latest lawsuit by the company, that has become a flashpoint in the ongoing U.S.-China trade dispute, has been filed in the Fifth Circuit Court of Appeals in New Orleans. It argues that the Nov 22 decision by the FCC is "unlawful" and requests the court to overturn the order and provide other relief for the company, court documents show.

Huawei, the world's largest maker of telecoms equipment and second biggest maker of smartphones, has repeatedly denied it would spy for any government and has challenged the U.S. to provide evidence, which it says Washington has not done.

"Both FCC chairman Ajit Pai and other FCC commissioners failed to present any evidence to prove their claim that Huawei constitutes a security threat, and ignored the facts and objections raised by Huawei and rural carriers after the FCC first made the proposal in March, 2018," Huawei's Chief Legal Officer Song Liuping said during a livestream press conference from Huawei's headquarters in Shenzhen, China.

Huawei's few remaining telecom customers in the U.S. are primarily small rural carriers, many of which have praised the company's products and said they would like to continue using them. Under the FCC ruling, equipment such as telecoms switchers from Huawei and ZTE, a second major Chinese company included in its decision, would have to be ripped out and replaced at a cost that the FCC has estimated would be close to $2 billion.

Michael Carvin, partner at U.S. legal company Jones Day which is representing Huawei, said the company's lawsuit alleges that the FCC decision is "illegal and unconstitutional." It also claims that the FCC singled out Huawei and ZTE but "never articulated or applied any consistent standard," which allowed it to "unfairly discriminate against [these] companies."

"There is an obvious lineage to what happened here," Carvin added. "Congress put enormous pressure on the FCC to take some action. And I think the FCC, although it's nominally independent, decided they were going to do Congress' bidding, come hell or high water. And they weren't going to let a lot of stubborn facts get in their way."

The FCC declined to comment.

Huawei's legal counterpunch is part of a multimillion dollar public relations and lobbying campaign by the company. But analysts cautioned that while the latest lawsuit might succeed in delaying implementation of the FCC decision, it was unlikely to win the company friends in Washington or elsewhere.

On Wednesday, U.K. Prime Minister Boris Johnson, who met in London this week with U.S. President Donald Trump, vowed not to involve Huawei in Britain’s 5G telecommunications networks if it compromised the country’s ability to work with close security allies such as the U.S.

"The primary benefit to Huawei will be a possible delay in the implementation of the FCC rule," Julian G. Ku, distinguished Professor at Maurice A. Deane School of Law at Hofstra University, said. "This delay, while the court hears the case, might buy Huawei some time."

The lawsuit, which comes almost exactly one year after the arrest of Huawei chief financial officer Meng Wanzhou on charges of bank fraud, is the second time this year Huawei has taken the U.S. government to court. In March, it launched a suit against a ban on federal agencies buying its equipment. That case is still being deliberated.

Despite its restrictions from operating in the U.S. and from being subject to a ban on its use of certain U.S. technologies after Washington blacklisted the company in May, Huawei has said its business has been little affected. 

The company, which employs nearly 200,000 people worldwide and generated more than $100 billion in sales last year, has also grown to dominate the market for superfast 5G wireless technology networks.

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