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Huawei crackdown

Five things to know: Meng Wanzhou's extradition hearing

Huawei says it trusts in Canada justice

The extradition hearing for Huawei CFO Meng Wanzhou begins on Jan. 20 in Vancouver.   © AP

VANCOUVER -- The lawyer for Huawei's chief financial officer Meng Wanzhou called the case against her an "artifice" on Monday, at the start of a hearing of her case which has strained relations between Ottawa and Beijing and that will decide whether she will be extradited to the U.S. to face charges of fraud and sanctions-breaking.

The Canadian judge will consider evidence after five days of hearings, but a final decision could take weeks, or months. Huawei said in a statement on Monday that the company stood behind Meng. "We trust in Canada's judicial system, which will prove Ms. Meng's innocence," it said.

The daughter of Huawei’s founder, Meng has been under house arrest for over a year. Her case has proved a thorn in the side for U.S.-China trade negotiations, a major headache for Canada, and comes just days after Washington and Beijing signed a phase one deal to resolve a trade war that has dragged on for a year and half.

Here are five things to know about Meng's legal battle and what it means for the company and countries involved.

1) What are the allegations against Meng and what is this hearing about?

In August 2018, a New York court issued an arrest warrant for Meng to stand trial in the U.S. for allegedly committing bank and wire fraud to violate U.S. sanctions on Iran.

That December, the 47-year-old was arrested at Vancouver's airport as she was changing planes for Mexico.

The U.S. says Meng deceived major banks, including HSBC, about Huawei's relationship with Skycom, a subsidiary in Iran, in order to sell equipment to the country, according to court documents.

Huawei denies any wrongdoing and the Chinese government has demanded Canada release Meng.

She was soon released on bail and ordered to remain under house arrest at her $10 million mansion in Vancouver, according to court documents.

Last March, Canada approved an order to extradite Meng to the U.S., but her lawyers are fighting to halt the process.

The official extradition hearing, which is expected to run from Jan. 20 to Jan. 24, is a crucial step in the extradition proceedings and will focus on the "double criminality" test -- for extradition to proceed, Meng's alleged crime must be a crime in Canada, too.

Her lawyers argue that since she is accused of violating sanctions on Iran, and Canada does not have such sanctions on the country, her case does not meet the double criminality requirement and thus she should not be extradited. On Monday in court, defense lawyer Richard Peck called the case against her "an artifice".

Canadian prosecutors counter that because Meng is accused of bank and wire fraud, which are crimes in both countries, she should be extradited, explained Paul Haswell, partner at Pinsent Masons.

Haswell said this hearing will not focus on evidence of wrongdoing on Meng's part, but only test the premise of her proposed extradition.

With such a high-profile case, the judge could take weeks or months to examine the facts put forward by both sides. The case may even take years to come to a conclusion.

2) What does this hearing mean for international relations?

The hearing comes amid a fresh pause in the U.S.-China trade war on the one hand, and a sharp rise in U.S.-Iran tensions on the one hand.

Canada's relationship with China and the U.S., meanwhile, has become strained.

"The U.S. and Canadian judiciaries pride themselves on their independence, and Meng's alleged wrongdoing took place before recent events in Iran," Haswell said. "Canada is taking steps to 'depoliticise' the case as much as it can."

Doing so may not prove easy. China has repeatedly condemned Meng’s arrest -- which came at the request of the U.S. -- as a retaliatory move in the ongoing trade war.

Two weeks after Meng's arrest, two Canadians were detained in China over claims of spying: former diplomat Michael Kovrig and businessman Michael Spavor. China denies the arrests were related to Meng's case.

"China has always said the two cases are different, but they also said that [if Canada] releases Meng, then they may be able to help on the case of the two Michaels," said Yves Tiberghien, politics professor at the University of British Columbia. In November, Tiberghien accompanied former ministers and ambassadors on a trip to China during which the cases of Meng and the two Michaels were discussed.

Canadian Prime Minister Justin Trudeau in December said U.S. President Donald Trump should not finalize a trade deal with China unless it includes the release of the two Canadians. It was not included in the Phase One deal signed on Wednesday.

"If the U.S. really warms up with China in terms of bilateral relationship, I think Canada is going to be left further in the cold," said Lynette Ong, politics professor at the University of Toronto. "We got into this and we suffered the consequence with two Canadians being detained, and then you guys went ahead and signed a trade deal and left Canada behind."

Canadian trade has also run into obstacles. Shipments of canola, one of its largest exports, encountered difficulties clearing Chinese customs not long after Meng’s arrest. Canadian farm products in general faced similar difficulties in April, according to Reuters.

Further straining U.S.-Canada ties, Trump earlier this month gave the order to kill Iran's Gen. Qassem Soleimani. Amid the heightened tensions following his death, Iran accidently shot down a Ukrainian commercial flight, killing all 176 passengers and crew aboard, including 57 Canadian citizens.

"The Canadian public understands that the acceleration of tension caused by the killing of this major general led to a chain of events, which led to the downing of the plane," Tiberghien said. "That is the general mood. The Canadian public is not very happy with the U.S. [and] Trump policy."

Trump in May said Huawei could be part of the trade deal, though many U.S. lawmakers, including Sen. Marco Rubio, a China hawk, have urged the president to leave the company out of negotiations with China.

The U.S. and China have said they will start talks on the Phase Two deal, and Trump says he will visit Chinese President Xi Jinping in Beijing soon.

3) Who is Meng and what is Chinese public sentiment toward her?

Meng Wanzhou, also known as Sabrina Meng or Cathy Meng, is Huawei founder Ren Zhengfei's daughter.

Ren founded Huawei in 1987 and has built it into the top telecommunication equipment manufacturer in the world and the No. 2 smartphone maker, behind only Samsung.

Huawei's advances in 5G networks in particular have helped put China on the technological map -- and made the company a target for scrutiny from U.S. lawmakers concerned about national security.

Meng has worked at Huawei since 1993. She has a master's degree and currently serves as the CFO and deputy chairwoman of the board of Huawei.

Residing in Shenzhen, she has a Hong Kong passport and a Chinese passport, according to court documents. Meng was once a permanent resident of Canada but has since relinquished that status.

Meng and her current husband, Liu Xiaozong, have a young daughter who lives in Shenzhen. The couple has two homes in Vancouver, with a total assessed value of roughly $21.9 million. Meng has been living at one of the homes for the past year, where she has a curfew from 11 p.m. to 6 a.m., the court documents show.

The Chinese public has generally been sympathetic toward Meng and Huawei's situation in the West, with with many seeing her detention as an affront to China's national pride.

On the first anniversary of her arrest, Meng published an open letter thanking people for their kindness and saying she has accepted her situation. She even tried to strike an optimistic note, adding that she might finally have time to read and do oil paintings.

The letter did not spark as much sympathy as Huawei's PR team expected, however. Instead, angry Chinese internet users attacked the company over its treatment of a former employee, Li Hongyuan.

Li sued Huawei for failing to pay his annual bonus in November 2018. A month later, Li was detained by Shenzhen police over alleged embezzlement claims made by Huawei because another employee transferred the payment through a personal bank account, according to Chinese media. Li said the payment was negotiated with Huawei’s HR staff.

After 251 days in jail, Li was released last August due to insufficient evidence. His story blew up on the Chinese internet, with many criticizing Huawei for its poor treatment of Li.

Posts on Chinese microblogging platform Weibo included such comments as "We'll never become Meng Wanzhou, but we could become the next Li Hongyuan" and "We firmly support the Canadian authorities to extradite the ‘princess’ to the US," reported Quartz.

With her hearing set to start on Monday, Chinese support for Meng is still evident on the internet, but it is not as passionate as before.

4) What are the best- and worst-case scenarios for Meng and Huawei?

The best scenario for Meng would be a ruling that the case does not meet the "double criminality" requirement or that there was an abuse of process during her arrest, which means Meng would be released.

Canadian Minister of Justice David Lametti also has the power to terminate the extradition case before the hearing ends in the name of national interest, but that could be "politically costly to do," according to Tiberghien.

Another possibility would be for the U.S. to drop its case against Meng. Trump in 2018 said he could intervene in the case if it were in the interest of national security or would help close a trade deal with China, according to Reuters.

There is a chance that securing a Phase Two deal could persuade Trump to go easy on Meng and Huawei. But hawkish U.S. lawmakers toward the company over its alleged ties with the Chinese government would likely object if that were to happen.

The worst-case scenario would be for Meng to be extradited to the U.S. and eventually indicted on the charges she faces.

"We might actually see the beginning of technological warfare between the U.S. and China," said Ong. "Western countries [might use] Ericsson or Nokia for 5G ... and send them off to other countries. Countries who do not see China as so much of a threat are going to go with Huawei."

“So the world might be divided into two camps led by the U.S. and China [respectively].”

5) What is the latest development?

On Friday, Meng and her lawyers were summoned to court to discuss a deadline for the prosecutor to disclose all relevant documents regarding the alleged abuse of process. The prosecution will try to disclose everything before Feb. 28, according to people familiar with the matter, which means a final decision on her extradition is unlikely to come until March at the earliest.

Recent Canadian court documents show that HSBC was aware of Huawei's business relationships in Iran, according to South China Morning Post. The bank staff and Huawei employees reportedly communicated about Skycom's bank accounts as early as 2010.

These documents could challenge the accusations that Meng lied about Huawei's financial ties with Skycom and its business activities in the Middle Eastern country. While these documents, if accurate, will not likely impact this hearing, they could prove a major factor if she goes to trial on fraud charges.

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