Year in review: Fallout deepens with each delay in Meng case, observers warn

A protracted extradition process for Huawei CFO will worsen outlook for B.C., Canadian businesses with Chinese exposure

Lawyers for detained Huawei CFO Meng Wanzhou have asked for more time to prepare her defence, but longer delays in her case will likely bring greater grief for Canadian companies with ties to China | Stocked House Studio/Shutterstock

Business in Vancouver has selected 10 top themes, events and issues for the year in our coverage. This story is one in a series of those.

Original online publication date: May 15, 2019


The first battle lines in the extradition hearing of Huawei Technologies Co. Ltd. CFO Meng Wanzhou have been drawn after the Chinese tech executive appeared in a Vancouver court last Wednesday, requesting a delay of almost half a year for her defence to seek additional information from Canadian authorities.

While the BC Supreme Court judge presiding over the case granted a middle-ground compromise date to the defence, all evidence points to Meng’s extradition becoming a drawn-out process lasting several years. That, observers argue, is not good news for businesses in B.C. and Canada, especially those that are exposed to the Chinese market.

The extradition has become one of the highest-profile legal affairs in recent Canadian history due to its geopolitical fallout.

Analysts note that, in addition to the continued detention of Canadians Michael Kovrig and Michael Spavor in China on espionage charges, cases like Beijing’s revocation of Canadian canola exporters’ trade permits this spring could become more frequent if the Meng case drags on.

“What we have seen is that China is increasing penalties as the process continues, and you cannot ignore that,” said Vancouver-based immigration lawyer Richard Kurland, who noted that neither Washington nor Beijing has shown great urgency in resolving the Meng case. “That’s a serious thing; our canola farmers are not happy about that. And so what’s happening is that the Americans take their time, Canada takes its time and China keeps ratcheting up the pressure. Who is paying the price? Canada.”

The diplomatic spat between Beijing and Ottawa over the Meng case has severely damaged bilateral relations, and a recent survey by trade advocacy non-profit Canada China Business Council (CCBC) showed the unease may be starting to hurt the Canadian economy.

According to the CCBC survey of 226 Canadian companies interviewed, 53% have made changes to their business plans since December 1 and 18% have cancelled or postponed contracts or investment plans in China. The report also found that about 20% of Canadian companies said they’ve seen a drop in Chinese demand for their goods, and one respondent said demand for its products has fallen 95% as Chinese consumers in its sector are “not interested in buying or putting money in Canada.”

Meng was arrested in Vancouver on December 1 while connecting from Hong Kong to Latin America, and she faces charges of fraud and money laundering for alleged breaches of U.S. trade sanctions against Iran. The U.S. Department of Justice has also accused Huawei of stealing trade secrets from companies like T-Mobile USA (Nasdaq:TMUS).

At the end of last Wednesday’s proceedings, BC Supreme Court Associate Chief Justice Heather Holmes ruled that the application for additional disclosure – in which the defence and Crown counsel will argue the merits of allowing Meng’s team to introduce more material than is normally allowed in an extradition process – will begin on September 23 and last for eight non-consecutive days, ending on October 4.

Meng’s defence team originally argued that due to the scope of the material, which mostly relates to a three-hour period when Meng was detained at Vancouver International Airport but involves law-enforcement agencies in Canada and the United States, lawyers would require months to gather it. They asked for an October 15 start date for application. Crown prosecutors, meanwhile, said the court has a responsibility to deal with the case swiftly, asking for a date no later than late August.

The extradition “committal” hearing will begin next January, the court also announced. Several observers argue that, with the Meng case set to drag on at least into 2020, Beijing has no shortage of Canadian business sectors it can target.

“Just look at our main exports to China, including those that can be sourced elsewhere,” said Hugh Stephens, distinguished fellow with the Asia Pacific Foundation of Canada, who added that things will only get worse if Washington inks its own deal with Beijing. “Lumber is a good example. Coal, minerals and agri-foods are, too. There’s going to be a managed trade; the Chinese are going to be encouraged to buy from the U.S. rather than from Canada.”

CCBC executive director Sarah Kutulakos said that she hopes her organization’s survey catches the attention of Ottawa, because the economic disruption brought about by Meng’s arrest and China’s retaliatory measures comes at a bad time for Canadian businesses linked to the country’s second-largest trading partner.

“Up until November 30, the relationship was going very well, both economically and diplomatically,” Kutulakos said. “Exports were up 18% last year; we haven’t been up 18% in quite a while. American exports to China were only up 5% to 7%.

“You can’t deny the underlying fact that China’s economic growth brings huge opportunities in services exports like education and tourism, as well as in e--commerce,” she said. “The economic potential for both countries is starting to show signs of being impacted, and companies don’t feel able to resolve the situation by themselves.”

The CCBC report found that 48% of Canadian respondents had postponed or cancelled travel plans to China, or plan to do so. Also, the survey found most Canadian firms saw Chinese demand for their goods drop by 20% to 80%. Meanwhile, of the 28 Chinese companies in the survey, about 14% saw Canadian demand for their products diminish since December 1.

At the latest court hearing, Meng’s defence strategy became clearer. Lawyers said they will key in on topics such as an alleged abuse of process by Canadian authorities, making an arrest with intent contrary to the related law’s intended purpose.

The defence will also look at a lack of dual criminality, which is a requirement for extradition. The CFO’s lawyers will argue that fundamental differences between Canada and the United States mean Meng’s alleged actions aren’t considered criminal in Canada. The topic of possible political interference, stemming from U.S. President Donald Trump’s comments that Meng could be used as a bargaining chip in negotiations, will also be brought up.

For those looking for a quick out of the Meng situation after 2020 and a subsequent economic rejuvenation, lawyer Kurland had one piece of advice: Don’t hold your breath.

“The only way I see this ending fast is if President Trump, in his view, succeeds with the negotiation on trade with China,” Kurland said. “Then, this whole thing finishes. Because this would be a gimme to China. Presidents can be very persuasive…. But if the people involved [in the extradition process] really press the hammer down, it can take a half a decade – at least – to get a conclusion out of this stuff.”