Huawei invokes US Constitution to take on federal government public procurement ban

18 September 2019 3:37pm
telecom router

16 September 2019. By Dave Perera and Kat Lucero.

Telecom manufacturer Huawei takes on the US government this week in a federal courthouse deep inside Texas, where attorneys for the Chinese company will argue Congress acted unconstitutionally by excluding it from obtaining contracts funded with federal money.

Congress blacklisted Huawei in a 2018 defense bill that takes full effect next year, making it illegal for federal procurement or grant money to flow to the company. Huawei's Plano, Texas-based American subsidiary sued six months after President Donald Trump signed the bill into law last August.

On Thursday, company and federal attorneys will face off in the Eastern District of Texas at the courthouse in Sherman to argue for an immediate ruling in their favor — Huawei in the hopes US District Judge Amos Mazzant will invalidate the blacklist, US Department of Justice attorneys in the expectation that he will send Huawei executives packing the 50 miles back to Plano.

Should Huawei lose, the case will be merely the latest in several government-led reversals stymying it from gaining a solid US foothold. The Commerce Department in May prohibited US firms from doing business with the company unless they get a special license.

That same day, the White House invoked national emergency powers in an executive order that bans telecommunications companies from buying equipment made in countries, such as China, that have engaged in a “long term pattern or serious instances of conduct” challenging national security. Five months earlier, Canadian officials arrested Huawei Chief Financial Officer Meng Wanzhou at the behest of the US, which is seeking her extradition to answer charges the company broke sanctions against Iran.

Outside observers give Huawei a low probability of success in its Texas lawsuit, leading some China watchers to suggest Huawei's court filings hide an ulterior motive.

“It’s primarily a PR move,” said Adam Segal, a director at the Council on Foreign Relations. “It’s just going to be part of their story, about how they are persecuted and a victim.”

There is no disputing that Congress singled out Huawei-made routing equipment as forbidden technology in the fiscal national defense authorization law enacted in 2018. Huawei says that means Congress passed a “bill of attainder,” something the Founding Fathers forbade twice over in the Constitution.

A bill of attainder is a legislative declaration of guilt without trial that results in punishment. In court filings, Huawei asserts the defense spending law subjects the company “to a burden that is severe, permanent, and inescapable.”

A potential problem with Huawei’s argument is that the US Court of Appeals for the District of Columbia just last year threw out a similar allegation from Russian cybersecurity company Kaspersky Lab. Like Huawei, Kaspersky sued to overturn a legislative prohibition preventing federal agencies from buying its products, also on the grounds that Congress passed an unconstitutional bill of attainder. But the ban wasn’t a punishment, concluded US District Judge Colleen Kollar-Kotelly  in dismissing the antivirus maker’s legal arguments.

“Nobody thinks that being shut out of the US market is a punishment,” said Julian Ku, a law professor at Hofstra University who has followed both lawsuits. Bans aren’t punitive if they serve a “prophylactic” policy purpose, Ku noted. “A punishment would be a fine,” he said.

The Kaspersky parallels aren't lost on Justice attorneys, who cite the case copiously in their motion to dismiss. From their perspective, Congress moved to protect federal networks against Chinese cyberthreats that could be transmitted via Huawei-made equipment.

And that, of course, is the real issue shadowing the Texas litigation: Whether Huawei by dint of its Chinese provenance constitutes a national security threat. Congress first suggested so in 2012, when the House Intelligence Committee wrote that the US “should view with suspicion” the presence of Huawei in the domestic telecommunications market. Distrust in the company has since accelerated with the Trump administration's prioritization of fifth generation cellular connectivity technology, an area the Chinese telecom giant dominates.

Huawei vociferously denies that its equipment is a conduit for Sino-state hacking; anti-Communist phobia may be the real driving force behind the ban, the company argues.

The question of whether Huawei takes orders from Beijing can’t be conclusively answered, said Segal. “The relationship between any Chinese company and the government is going to be opaque and unknowable to the outside world,” he said. “Given national security concerns, there seems to be a justification to keeping the company’s at arm’s length.”

Then why Huawei's lawsuit, especially given courts' typical deference to the government on national security arguments?

“It’s worth it for them to take a long-shot lawsuit because the payoff is really big,” Ku said.

Plus, there's a wild card possibility of total redemption via a president who has shown flexibility when it comes to national security, if it results in a trade agreement. Unusually, the president has more than once suggested that the company's access to the US market depends on China's willingness to cut a deal.

“It’s much simpler not to do any business with Huawei,” Trump said in August. “That doesn’t mean we won’t agree to something if and when we do a trade deal.”

China and the US are scheduled to resume trade talks again in Washington in October.