ISED referenced U.S. action on Chinese telecoms as justification for ban
By Ahmad Hathout
OTTAWA – A Chinese telecom that resold Canadian services and plans was operating illegally for five years and posed a significant threat to the country’s national security, Innovation Canada said in a submission to the Federal Court.
The department was responding to a judicial review application by China Mobile, a mobile virtual network operator that was asked this summer to leave the country after a public safety review.
The company is asking the court to pause the revocation of its authorization to operate until the court decides on the case. It argued it was not subject to the ban because it does not own or operate telecommunications networks and its presence in the country was always a matter of public record, despite it not notifying ISED about its operations for years.
Before a Federal Court judge on Wednesday, China Mobile said the company received a Basic International Telecommunications Services license from the CRTC, has been a named company on the regulator’s website, and has registered with the complaints watchdog, the Commission for Complaints for Telecom-television Services.
It also noted the federal government, through emails, said it was aware of a “new” service China Mobile was offering – suggesting previous knowledge of the existence of the company – which led to a request to provide notification to the government so it could review the investment in late 2020.
Beside its claim that the company has been operating illegally for five years, counsel for the government said the company is at the whim and influence of the government in China, whose state-sponsored cyber activities are “among the greatest strategic threats to Canadian governments, individuals and organizations,” according to a 2020 National Cyber Threat Assessment from the Canadian Centre for Cyber Security.
The government also pointed to assessments done by its ally in the United States, which has been acting against investments in China-owned telecoms, as proof of the threat to the country.
The crux of China Mobile’s argument is that it is simply a reseller and marketer of Canadian services of telecoms, including Telus. It argues it poses no risk to Canadian network security because it does not own or operate any network facilities.
During Wednesday’s hearing, China Mobile’s counsel suggested the federal government’s decision was shrouded in bias emerging from political tensions with China. At the time of the ban order, two Canadian citizens were being detained by China, and had been for years. They were eventually released by Beijing this past September.
Counsel for the company, which has a link to the Chinese government, argued Wednesday that had the company posed a serious threat, it would not have taken the government months since it was notified of its presence to make its decision to ban it. It also argued it is improper for the federal government to say that the company – which was incorporated in the country in 2015 – has been operating illegally for five years because that encapsulates the period after it notified the government of its operations.
At the hearing, the two sides sought to challenge each other on whether China Mobile’s request meets the standard for the issue to be tried. China Mobile argued that if it is forced to leave the country and the judicial process exonerates it, it would have to restart the business process all over again, causing irreparable harm. Counsel to the federal government, however, argued China Mobile assumed the risk when it decided to operate illegally for years without notifying the federal government of its presence.
“Any loss of business that [the company] claims it will now suffer is due to the fact that it has been operating in Canada for five years and has established a new Canadian business without having complied with its obligations” under the Investment Canada Act, a government affidavit said.
The Canadian decision to remove China Mobile was influenced by U.S. decision-making that has banned Chinese investments and is denying licenses to those companies that pose a national security threat. In October, the U.S. telecom regulator, the Federal Communications Commission, revoked the operating authorizations of Chinese state-owned telecom China Telecom, which is appealing the decision. It is also seeking further bans on other state-owned telecoms, which is referenced in the Canadian government affidavit.
What is left to ponder is what kind of precedent, if any, this sets for more high-profile government reviews, including the yet-to-be-decided decision on 5G security and Huawei’s role in it. Huawei provides wireless equipment to telecoms and, at least until recently, had equipment in big telecom networks. Some big telecoms have already begun to rip out their Huawei equipment and are replacing it with alternatives.
