Via Financial Times

Huawei has launched a legal appeal against the US telecoms regulator, alleging it acted illegally when it banned the company’s customers from receiving federal broadband subsidies.

The Chinese telecoms equipment maker has filed a lawsuit in a federal court in New Orleans claiming the Federal Communications Commission went beyond its remit when it barred companies from accessing government broadband funding if they used Huawei technology.

The FCC’s move, which was announced last month, is one of a range of policies enacted under the Trump administration targeted at Huawei, which US officials argue poses a risk to national security because of the possibility its equipment could be used by Beijing for spying.

But the Chinese company argues that the FCC did not have the authority to enact its ban, and that it acted arbitrarily by singling out Huawei and its rival ZTE in particular.

Michael Carvin, a partner at the law firm Jones Day and Huawei’s legal spokesperson in the US, said: “This a clear example of arbitrary and capricious decision making.”

He added: “The FCC is a domestic entity that regulates telecoms. It is not supposed to set foreign policy.”

Huawei is arguing the FCC acted illegally in three ways.

First, the company said any sort of ban on national security grounds constituted foreign policy, rather than telecoms regulation. Second, it said the FCC acted arbitrarily by singling out Huawei and ZTE without setting out any standards by which those companies were being judged. Third, it said the FCC compounded that unfairness by not allowing the company to comment on the part of the rule that mentioned it specifically, which was announced only after the consultation period.

Eric Crusius, a partner with the law firm Holland & Knight, said: “While Huawei’s arguments, on their face, may be compelling, it will be interesting to see if the facts bear out and support those arguments.

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“It is imperative for the government that they separate national security policy from trade policy to keep its decision as clean as possible. Conflating the two will add to any argument that the government’s actions were arbitrary and capricious.”

The lawsuit is the second time this year Huawei has taken the US government to court, following the case it lodged in March against a ban on federal agencies buying its equipment. That case is still being deliberated.

Meanwhile, the Chinese company suffered a setback earlier this week in a separate legal case in New York, in which US prosecutors have accused the company and its chief financial officer Meng Wanzhou of bank fraud.

The court on Tuesday disqualified Huawei’s top lawyer in the case, James Cole, after the Department of Justice claimed he was conflicted because of his previous job as the department’s second most senior official from 2010 to 2015.

Prosecutors said in May that Mr Cole, a partner at Sidley Austin, had “personally supervised and participated” in an unnamed investigation that created a conflict of interest with his representation of Huawei.