Huawei loses its day in court against the FCC
Often, especially in the Trump days, Chinese companies had a run of luck challenging hasty executive orders in the cooler climates of the courts. But not Huawei, not today.
The FCC is bang to rights calling the Shenzhen-based company
a national security threat, ruled a three-judge panel of the US Court of
Appeals for the Fifth Circuit. And thus, continued the court, the FCC was on
solid legal ground in saying Huawei can't use US federal funds set aside for
broadband development to subsidize its 5G equipment sales.
The subsidies, "universal service funds," are
overseen by the FCC. This pool of money subsidizes cheaper telephone and
Internet access in high-cost areas, and for categories of users like rural healthcare
facilities, schools and libraries.
First, let's 5G all the lawyers
Lawyers for Huawei argued the US regulator was intruding on
the president's foreign affairs powers, and skipped necessary steps in federal
agencies' decision making.
Huawei's argument that the FCC was usurping the role of the
US Department of State and other foreign affairs agencies "gives us
pause," admitted Circuit Judge Stuart Kyle Duncan. But the FCC wasn't
intervening in foreign affairs, but acting within its remit as a telecoms
regulator, the judge argued.
"If we were convinced that the FCC is here acting as 'a
sort of junior-varsity' State Department, we would set the rule aside. But no
such skullduggery is afoot," said the judge. "Assessing security
risks to telecom networks falls in the FCC's wheelhouse," said Duncan.
The FCC's lawyers also said the agency, before making its
2019 rule, had properly evaluated evidence gathered by Congress and the US
Department of Justice. During oral arguments, the judges focused on whether
Huawei had failed to eliminate security weaknesses that could permit hackers,
including the Chinese government, to eavesdrop on data and voice
communications.
Got that appeal
On both points, the three-judge panel, sitting in New
Orleans, thought the FCC had the better of the argument, and so denied Huawei's
petition for review. Under US law, reviews of FCC orders go directly to the
court of appeals. The appeals court then first applies a Chevron test to see
whether Congress has "directly spoken to the precise question at
issue." In this case, the agency needs to follow the "unambiguously
expressed intent of Congress."
If not, then the courts' test (the "Alenco test")
becomes whether an agency's act was "arbitrary and capricious," or an
abuse of its discretion. So the panel applied both tests, and decided Congress
hadn't spoken on the precise point, but the FCC hadn't been arbitrary,
capricious, or abused its discretionary powers. On the bright side, Huawei has
lots of other courtroom dramas to look forward to.
The spy trial of a former employee has just got going this
month in a court in Warsaw.
Huawei is also fighting the extradition of its chief
financial officer Meng Wanzhou from Canada to the US. This now involves both a
courtroom battle in Vancouver, and a second front in the UK, where Huawei is
trying to force HSBC to release documents it thinks will help it win the
Canadian case. And an administrative court in Stockholm is deliberating over
Huawei's case against Sweden's telecom regulator, for banning Huawei from the
country's 5G networks.
Sweden and the UK are the only European countries to have
banned Huawei and ZTE outright from their 5G networks. Other countries, like
France, Italy and Germany, have instead had recourse to red tape. France has
said operators using Huawei 5G equipment won't be able to renew their current
licenses when they expire.
Germany and Italy have also, just coincidentally, recently
set very high security bars for 5G equipment manufacturers. And if Huawei
doesn't end up meeting those, it may be a matter of the Italian and German
translations of "oh dear, how sad, never mind."
But as Huawei fights rearguard battles against its exclusion
from western markets, New Orleans at any rate will not be its last courtroom.
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