Huawei sues U.S. government saying ban on its equipment is unconstitutional

People walk past a sign board of Huawei at CES (Consumer Electronics Show) Asia 2018 in Shanghai

HONG KONG/WASHINGTON (Reuters) - Chinese telecoms equipment maker Huawei Technologies Co Ltd on Thursday confirmed it is suing the U.S. government over a section of a defense bill passed into law last year that restricted its business in the United States.

Huawei said it had filed a complaint in a federal court in Texas challenging the constitutionality of Section 889 of the National Defense Authorization Act (NDAA), a section signed into law by the U.S. president in August that banned federal agencies and their contractors from procuring its equipment and services.

“The U.S. Congress has repeatedly failed to produce any evidence to support its restrictions on Huawei products. We are compelled to take this legal action as a proper and last resort,” Huawei Rotating Chairman Guo Ping said in a statement.

“This ban not only is unlawful, but also restricts Huawei from engaging in fair competition, ultimately harming U.S. consumers. We look forward to the court’s verdict, and trust that it will benefit both Huawei and the American people.”

While Huawei had very little market share in the U.S. telecoms market before the bill, it is the world’s biggest producer of telecoms equipment and is seeking to be at the forefront of a global roll-out of fifth generation (5G) mobile networks and services.

“Lifting the NDAA ban will give the U.S. Government the flexibility it needs to work with Huawei and solve real security issues,” Guo said.

In its lawsuit, Huawei said its “equipment and services are subject to advanced security procedures, and no backdoors, implants, or other intentional security vulnerabilities have been documented in any of the more than 170 countries in the world where Huawei equipment and services are used.”

The privately owned firm has embarked on a public relations and legal offensive as Washington lobbies allies to abandon Huawei when building 5G mobile networks, centering on a 2017 Chinese law requiring companies cooperate with national intelligence work.

Founder and Chief Executive Ren Zhengfei has said Huawei, the world’s biggest telecoms gear maker, has never and will never share data with China’s government.

NO PROOF

The NDDA bans the U.S. government from doing business with Huawei or compatriot peer ZTE Corp or from doing business with any company that has equipment from the two firms as a “substantial or essential component” of their system.

In its lawsuit, filed in U.S. District Court in the Eastern District of Texas, Huawei argues that the section of the law is illegal because it could sharply limit the company’s ability to do business in the United States despite no proof of wrongdoing.

Separately, the lawsuit also alleges that Huawei has been denied due process and that Congress, by stripping Huawei of U.S. commercial opportunities, has violated the “separation of powers” portion of the constitution by doing the work of the courts.

UPHILL BATTLE

Some legal experts, however, said Huawei’s lawsuit is likely to be dismissed because U.S. courts are reluctant to second-guess national security determinations by other branches of government.

The lawsuit “will be an uphill battle because Congress has broad authority to protect us from perceived national security threats,” said Franklin Turner, a government contracts lawyer at McCarter & English.

In November 2018, a federal appeals court rejected a similar lawsuit filed by Russian cybersecurity firm Kaspersky Lab, which was challenging a ban on the use of the company’s software in U.S. government networks.

The Texas court hearing Huawei’s case will not be bound by that decision, but will likely adopt its reasoning because of the similarities in the two disputes, said Steven Schwinn, a professor at the John Marshall Law School in Chicago.

“I don’t see how (Huawei) can really escape that result,” said Schwinn.

If a judge decides Huawei has a plausible claim the case will proceed to the discovery phase, in which internal documents are shared and U.S. government officials could be forced to provide testimony and lay out their national security concerns.

RETRIBUTION

The legal action and public relations outreach compare with a more restrained response in December emphasizing “trust in justice” when its chief financial officer, Sabrina Meng Wanzhou, was arrested in Vancouver at U.S. request.

The United States has accused Meng - Ren’s daughter - of bank and wire fraud related to breaches of trade sanctions against Iran.

Meng appeared in court on Wednesday during which her lawyer expressed concern that the allegations have a political character, raising U.S. President Donald Trump’s comments on the case.

Separately, Meng, who is fighting extradition, is suing Canada’s government for procedural wrongs in her arrest.

The case had strained relations with China, which this week accused two arrested Canadians of stealing state secrets in a move widely seen as retribution for Meng’s arrest.

While Meng is under house arrest in Vancouver, it is unclear where the two Canadians are being detained in China.

Sources previously told Reuters that at least one of the Canadians did not have access to legal representation.CHANGE OF TUNE

Ren met international media for the first time in several years in mid-January, calling U.S. President Donald Trump “great” and refraining from commenting directly on Meng’s case. Shifting tone, Ren in mid-February said Meng’s arrest was politically motivated and “not acceptable”.

Long before Trump initiated a trade war with China, Huawei’s activities were under scrutiny by U.S. authorities, according to interviews with 10 people familiar with the Huawei probes and documents related to the investigations seen by Reuters.