11 votes

How does the USA have jurisdiction over Huawei's alleged sales to Iran?

It took a while for this to sink in, since the arrest of Huawei's Chief Financial Controller a few days ago, but...

How does the USA have jurisdiction over Huawei's alleged sales to Iran?

Huawei is a Chinese company, not an American company. Sure, the USA has imposed sanctions on trading with Iran - but surely those sanctions would apply only to American companies. How does the U.S. government have jurisdiction over what a Chinese company does?

17 comments

  1. talklittle Link
    The full details aren't yet available from the Justice Department: The following is conjecture, but presumably Huawei relies on US component makers for their products, and also has an interest in...

    The full details aren't yet available from the Justice Department:

    The Justice Department has not revealed what Huawei was doing to run afoul of the sanctions. Chinese companies regularly do business in Iran, and much of that trade complies with sanctions regulations. The question appears to be whether Huawei sold technology from the United States to Iran or violated sanctions in some other manner.

    The following is conjecture, but presumably Huawei relies on US component makers for their products, and also has an interest in selling their devices in the US. In exchange for these privileges they subjected themselves to US law including sanctions.

    Still conjecture, they may have provided said US-made components or technologies to Iran through some hidden arrangement. So when the CFO set foot on Canadian territory, and Canada cooperates with US law enforcement, that's the basis on which she was able to be arrested.

    13 votes
  2. [7]
    Deimos Link
    I haven't followed the exact details of the Huawei case, but in a general sense, if they don't try to enforce things in this way, it seems like sanctions would be effectively useless. To...

    I haven't followed the exact details of the Huawei case, but in a general sense, if they don't try to enforce things in this way, it seems like sanctions would be effectively useless. To circumvent them, an Iranian company would just need to find any company in a non-sanctioned country willing to buy from the USA and re-sell to them. If there's no punishment for doing that, the sanctions are completely ineffective.

    7 votes
    1. [6]
      Algernon_Asimov Link Parent
      But, how does the USA have any jurisdiction over a company that operates in another country? How do their sanctions apply to foreign companies?

      But, how does the USA have any jurisdiction over a company that operates in another country? How do their sanctions apply to foreign companies?

      3 votes
      1. [5]
        Deimos Link Parent
        They don't directly, but they can arrest you if you come to the USA (or, like in this case, ask a friend/ally to do it for them). Similarly, a Chinese person could do something like run a piracy...

        They don't directly, but they can arrest you if you come to the USA (or, like in this case, ask a friend/ally to do it for them). Similarly, a Chinese person could do something like run a piracy site from China, disregarding American intellectual-property laws, but they'd be at risk of being arrested over it if they ever travel to the USA (or even other countries willing to extradite to the USA) in the future.

        5 votes
        1. [4]
          Algernon_Asimov Link Parent
          But how are Chinese companies subject to U.S. law in the first place? Sure, their executives can be arrested, but they have to be arrested for committing a crime. And, how can a Chinese executive...

          But how are Chinese companies subject to U.S. law in the first place? Sure, their executives can be arrested, but they have to be arrested for committing a crime. And, how can a Chinese executive in a Chinese company in China be under the jurisdiction of U.S. criminal law?

          1 vote
          1. [2]
            cfabbro (edited ) Link Parent
            You keep saying that "Huawei is a Chinese company" and implying that therefor the US has no jurisdiction over them, and while that it is technically true that they are a Chinese company, that is...

            You keep saying that "Huawei is a Chinese company" and implying that therefor the US has no jurisdiction over them, and while that it is technically true that they are a Chinese company, that is also incredibly misleading. Huawei is a multinational, not just a Chinese company. They are headquartered in Shenzen but do business and have offices/subsidiaries in the US, Canada, UK and over a hundred other countries. As such, they and their executives are subject to the laws in those countries and if their executives violate said laws then they can be arrested when visiting that country and/or when they visit a country with an extradition treaty with the country in which the laws were violated. Even companies that don't do business directly in a country can violate that country's laws and so potentially run afoul of that country's courts and their executives arrested if they ever set foot there (or in a country with an extradition treaty with them). That isn't specific to the US either, so IMO this issue of "jurisdiction" is not nearly as muddled as you're making it out to be. That doesn't make it right necessarily, but that's how jurisdiction and extradition has always worked, worldwide.

            Now with all that said, I want to make it clear that I don't agree with what is going on right now with Canada essentially doing the US' dirty work in an escalating trade war with China by arresting Huawei's CFO, despite her having violated no laws here in Canada... however we do have extradition treaties with the US and an extradition request resulting in an arrest is not entirely unprecedented. We shall just have to wait and see what the Canadian courts think about this particular situation.

            p.s. I would also note that Huawei does business in Australia, who also has strong bilateral extradition treaties with the US, so this situation easily could have landed in your country's lap instead of mine.

            10 votes
            1. Algernon_Asimov Link Parent
              So why not arrest one of the executives of those companies which do operate within the USA? How does the U.S. justify arresting a Chinese employee of a Chinese company? Sure! I'm sure there are...

              They are headquartered in Shenzen but do business and have offices/subsidiaries in the US, Canada, UK and over a hundred other countries.

              So why not arrest one of the executives of those companies which do operate within the USA? How does the U.S. justify arresting a Chinese employee of a Chinese company?

              Even companies that don't do business directly in a country can violate that country's laws

              Sure! I'm sure there are many companies in other countries that violate Australia's anti-bribery laws. But that's none of our business, unless they're operating in Australia or bribing Australians. We wouldn't arrest the CFO of an Indonesian company for bribing a Malaysian government official (as a purely hypothetical example) - even if the Indonesian CFO happened to visit Australia. That bribery happened outside Australia, and we have no jurisdiction over what happens in Indonesia or Malaysia.

              How does the U.S. government have jurisdiction over what a Chinese company does outside of the USA?

          2. Deimos (edited ) Link Parent
            I don't think there's going to be a satisfying answer, it's just... what they do. I definitely agree that it's a strange concept, and it comes up fairly often with internet-related things like the...

            I don't think there's going to be a satisfying answer, it's just... what they do.

            I definitely agree that it's a strange concept, and it comes up fairly often with internet-related things like the piracy example I mentioned. There are a lot of people that, because of things they've done on the internet from their home country (where those things aren't illegal), can no longer visit the USA without risking being arrested on charges related to hacking, intellectual property, etc.

            3 votes
  3. vakieh Link
    I commented on an earlier thread about how wrong I think it is, but the jurisdiction is applied due to Huawei buying products from the US, which come with an implicit legal responsibility that you...

    I commented on an earlier thread about how wrong I think it is, but the jurisdiction is applied due to Huawei buying products from the US, which come with an implicit legal responsibility that you cannot sell them on to any country the US is imposing certain trade sanctions or embargoes on. Huawei has allegedly been buying US components, installing them in their products, then on selling them to Iran, which is the source of the US's argument.

    5 votes
  4. [6]
    Tau_Zero Link
    From what I've been able to gather, the US plans to charge Meng Wanzhou, the Huawei CFO, with conspiracy to defraud multiple financial institutions. The allegations are that they lied to financial...

    From what I've been able to gather, the US plans to charge Meng Wanzhou, the Huawei CFO, with conspiracy to defraud multiple financial institutions. The allegations are that they lied to financial institutions that they were not affiliated with Hong Kong-base Skycom Tech Co Ltd, which violated US and EU sanctions against Iran by selling them HP computers. They tried to claim that Skycom was just a partner, but Huawei owns all of the company shares (through a middle management company). For Meng specifically, "At the time, Meng served as the management firm's company secretary. Meng also served on Skycom's board between February 2008 and April 2009"

    4 votes
    1. [5]
      Algernon_Asimov Link Parent
      Yeah, but how does the USA have jurisdiction over "Hong Kong-base Skycom Tech Co Ltd"? Last time I checked, Hong Kong was not one of the 50 states.

      Yeah, but how does the USA have jurisdiction over "Hong Kong-base Skycom Tech Co Ltd"? Last time I checked, Hong Kong was not one of the 50 states.

      1. [4]
        Tau_Zero Link Parent
        I may be wrong, but I think this is how: A company can't operate within/with the US if the company violates US sanctions (e.g. doing prohibited business with a sanctioned country) To operate...

        I may be wrong, but I think this is how:

        1. A company can't operate within/with the US if the company violates US sanctions (e.g. doing prohibited business with a sanctioned country)
        2. To operate within/with the US, you need to accurately represent your business and connections to the US and financial institutions.
        3. Huawei operates within/with the US.
        4. Skycom did business with a US sanctioned state, Iran.
        5. Huawei claimed/claims no relation to Skycom.

        If #5 is an accurate claim, then Huawei is in the clear.
        If #5 is inaccurate, and Skycom is/was part of Huawei as alleged, then Huawei runs into problems within US jurisdiction regarding with #2 and #1

        4 votes
        1. [3]
          Algernon_Asimov Link Parent
          I would still imagine that the only legal response to this situation would be for the USA to revoke permission for the company to operate within/with the US. They can't reach out and arrest a...

          I would still imagine that the only legal response to this situation would be for the USA to revoke permission for the company to operate within/with the US. They can't reach out and arrest a citizen of another country for operating in another country.

          I don't understand how this works.

          1. [2]
            Tau_Zero (edited ) Link Parent
            For simplicity, let's say the US has a law: "It is illegal for you to operate in our country if, at any time anywhere, you are doing business that violates one of the US sanctions". There are...

            For simplicity, let's say the US has a law: "It is illegal for you to operate in our country if, at any time anywhere, you are doing business that violates one of the US sanctions". There are additional laws about fraud. A company XYZ says "I would like to do business in the US. No part of our business is violating or has violated US sanctions." and is granted permission.

            Then it comes to light that company XYZ may have at some point violated US sanctions and also lied about the connection. XYZ has now broken US laws while operating in US jurisdiction. Penalties for breaking such a law include fines "up to $20 million, depending the offence, and prison sentences can be as long as 30 years."(link). When one of those involved is within US jurisdiction or a jurisdiction with a US extradition agreement, they are arrested.

            5 votes
            1. Algernon_Asimov Link Parent
              Okay. That makes sense. Stupid sense, but still sense.

              Okay. That makes sense. Stupid sense, but still sense.

              1 vote
  5. [2]
    dubteedub Link
    You hit the nail on the head I think. I saw this piece yesterday arguing that this may be an example of the USA overstepping its bounds, or at the very least may face some reprisals from China....

    You hit the nail on the head I think. I saw this piece yesterday arguing that this may be an example of the USA overstepping its bounds, or at the very least may face some reprisals from China.

    My more general worry is that the Western world is overusing the power of its systems of legal and economic cooperation. It is threatening to pull that access when people or institutions do things it doesn’t like, and more domestic laws are taking on a global reach. Political scientists Henry Farrell and Abraham L. Newman have called this “weaponized interdependence.”

    While guilt remains undetermined, evidence does indicate there were ostensibly reasonable grounds for Meng’s arrest, namely the possibility that she helped create a shell corporation to evade anti-Iran sanctions. But the procedural normality of the arrest is precisely what scares me. There are so many international laws, and so many are complex or poorly defined, and there are a couple hundred countries in the world. Arguably most multinational corporations are breaking some law in some manner or another, and thus their senior executives are liable to arrest. If I were a top U.S. tech company executive, I would be reluctant to travel to China right now, for fear of retaliation.

    How Meng Wanzhou’s Arrest Might Backfire

    2 votes
    1. Algernon_Asimov Link Parent
      I'm not trying to hit any nail on any head. This isn't a leading question. It's an honest question to get information.

      I'm not trying to hit any nail on any head. This isn't a leading question. It's an honest question to get information.

      2 votes