What is the Huawei Case Really About? Sanctions to Regulate Technology?

ALINA VENEZIANO* ∙ NOVEMBER 21, 2019 ∙ ARTICLE

Sanctions are imposed for the purpose of changing behavior or inducing action. They have become popular within the past several decades as a means of leverage, non-military pressure, and imposing conditions upon other states. However, sanctions may cripple another state’s economy and permanently damage its reputation. Nevertheless, there are legitimate bases for using sanctions, such as protecting against national security threats. Cybersecurity risks, in particular, can be very damaging since the United States’ military, defense, and intelligence data are stored using electronic and remote means. Therefore, there is an obligation to protect against this, and such a task falls to the branches of the U.S. government. How far this obligation extends represents a key issue and is the subject of this article.

With this article, I intend to analyze the probability of success for the Huawei case. In doing so, I examine precedents such as Kaspersky Lab and Nixon, due to their discussion of the U.S. Constitution’s Bill of Attainder Clause. However, the more critical purpose of this article is to determine the propriety of the United States’ use of sanctions as a means of regulating the major companies of a foreign sovereign. First, I conclude that sanctions can easily be interpreted as either a means of punishment or protection, especially when considering the ambiguities around the Bill of Attainder Clause. Second, I maintain that the use of sanctions does not necessarily solve the underlying issue between the United States and China. This article is meant to highlight these implications.

In January 2019, a grand jury returned a ten-count indictment in the District Court for the Western District of Washington against Huawei.[1] The indictment centers around the business relationship between Huawei and T-Mobile. In 2006, T-Mobile created a robotic phone testing system, “Tappy,” which was coveted by China.[2] The indictment alleged that one of Huawei’s engineers stole a Tappy robot arm.[3] Also in January 2019, a grand jury returned a superseding thirteen-count indictment in the Eastern District of New York against Huawei, its U.S. and Iranian subsidiaries, and its chief financial officer, Meng Wanzhou, who was arrested in Canada for allegedly breaching sanctions concerning dealings with Iran and defrauding banking institutions.[4]

On March 6, 2019, Huawei filed a complaint in the U.S. District Court for the Eastern District of Texas against the United States and the heads of various agencies.[5] The challenge attacks Section 889 of the National Defense Authorization Act (NDAA) of 2019.[6] The Act prohibits Huawei and its rival in China, ZTE Corporation, from selling to federal agencies over concerns about cybersecurity and Huawei’s alleged connections to the Chinese government.[7] Huawei asserts that Section 889 violates the Bill of Attainder, Due Process, and Vesting Clauses of the U.S. Constitution.[8] The alleged violation of the Bill of Attainder Clause is Huawei’s primary argument. The Bill of Attainder Clause states that “[n]o Bill of Attainder or ex post facto Law shall be passed.”[9] In Cummings v. Missouri, the Supreme Court defined a bill of attainder as “a legislative act which inflicts punishment without a judicial trial.”[10]

Precedent is against Huawei. In 2018, the Court of Appeals for the D.C. Circuit decided Kaspersky Lab, Inc. v. United States Department of Homeland Security.[11] Kaspersky Lab challenged the 2018 NDAA,[12] which banned the use of Kaspersky products by governmental agencies. Kaspersky asserted that the ban was unconstitutional because it was denied due process of law and it was being singled out for punishment contravening the Bill of Attainder Clause. The United States claimed the ban was based on national security concerns, considering the Russian interference in the 2016 presidential election. The Court of Appeals held that Congress’ decision to ban the company was reasonable because its products could have compromised the United States and there was insufficient evidence of congressional punitive intent.[13]

In 1977, the Supreme Court decided Nixon v. Administrator of General Services.[14] Nixon is relevant for setting forth three approaches for analyzing “punishment”: the historical, functional, and motivational approaches. The historical approach, broadly, inquires whether the challenged statute falls within historical meaning of legislative punishment. In England, attainder was a “parliamentary Act sentencing a named individual or identifiable members of a group to death.”[15] The functional approach analyzes “whether the law under challenge, viewed in terms of the type and severity of burdens imposed, reasonably can be said to further nonpunitive legislative purposes.”[16] Lastly, the motivational test inquires whether the “legislative record evinces a congressional intent to punish.”[17]

What is really at stake here? Is this a distraction from the larger issue regarding trade deals and negotiations? This may be nothing more than a race to the finish line: who will be the dominant state in the next era of technological advancement, the 5G network? Both the United States and China are trying to assert their supremacy for 5G technology. With respect to sanctions as an effective tool for changing state behavior, where is the line between sanctions as punishment and sanctions as protection? The use of sanctions is based on several assumptions, some of which may be inapplicable or faulty. First, it assumes that the receiving state will be discouraged from continuing down the same path and therefore motivated to change its behavior in order to have the sanctions lifted. Second, it assumes that the state receiving the sanctions will be the only one affected. Third, perhaps slightly, it assumes that once sanctions are lifted, healthy relationships will be restored.

The status of the Bill of Attainder Clause is very indeterminate and has strayed significantly from its meaning at the time of the American Founding.[18] With the Huawei situation, it can be argued that it is common practice for the Chinese government to be closely informed of the operations of its major technological companies and, therefore, the United States should not regulate this practice. But how long can the United States turn a blind eye to the “local practices” of another nation? When does a U.S. regulation that possibly infringes upon sovereignty of another state turn into a U.S. regulation that is justified because it protects the national security of the United States?

The Bill of Attainder Clause is implicated in these inquiries, though it does not resolve the underlying issue. Huawei is unlikely to prevail under Kaspersky because the stated purpose of Section 889 of the 2019 NDAA—which is to uphold the “public safety, security of government facilities, physical security surveillance of critical infrastructure, and other national security purposes”[19]—is a legitimate national security concern. Further, the congressional intent in Section 889 is unlikely to satisfy any of the three categories of “punishment” per Nixon because it does not impose a historical definition of punishment, the legislation furthers nonpunitive purposes, and there is an insufficient congressional record that demonstrates an intent to punish Huawei. Therefore, the real issues may be more international in scope than immediately apparent, considering the ongoing trade war between the United States and China, the assertion of dominance in the 5G global telecommunications industry, and the regulation of foreign conduct through sanctions.

Thus, using the Huawei case as a starting point is useful because it combines the following issues into one unique comprehensive analysis for academic thought: (1) sanctions, (2) technology, and (3) the extent to which the branches of the U.S. government affect the international realm. Technology erases borders, making some actors appear as if they were right next to you and, therefore, the consequences of their actions appear as something that can be legislated against. Subjectivity is important, but when does it become objective?

—

*LL.M., New York University School of Law, 2019; J.D., Georgetown University Law Center, 2018; M.B.A. in Healthcare Management and B.S. in Accounting, Western Governors University, 2011.

[1] See Indictment, United States v. Huawei Device Co., Ltd. et al, No. 2:19-cr-00010-RSM, 2019 WL 653277 (W.D. Wash. Jan. 16, 2019), available at https://www.justice.gov/opa/press-release/file/1124996/download.

[2] See id., at p. 2, 15–21.

[3] See id., at p. 14, 20–28.

[4] See Superseding Indictment, United States v. Huawei Technologies Co., Ltd. et al, Cr. No. 18-457 (S-2) (AMD) (E.D.N.Y. Jan. 24, 2019), available at https://www.justice.gov/opa/press-release/file/1125021/download.

[5] See Complaint, Huawei Technologies Co., Ltd. et al v. United States et al, No. 4-19-cv-00159 (E.D. Tex., Mar. 6, 2019), available at https://www.wsj.com/public/resources/documents/huawei.pdf?mod=article_inline.

[6] See John S. McCain National Defense Authorization Act for Fiscal Year 2019, Pub. L. No. 115-232, § 889, 132 Stat. 1636 (2018) [hereinafter 2019 NDAA].

[7] Id.

[8] See id., at para. 112.

[9] See U.S. Const. art. I, § 9.

[10] Cummings v. Missouri, 71 U.S. 277, 323 (1866).

[11] See Kaspersky Lab, Inc. v. United States Dep’t of Homeland Sec., 909 F.3d 446 (D.C. Cir. 2018).

[12] See National Defense Authorization Act for Fiscal Year 2018, Pub. L. No. 115-91, § 1634, 131 Stat. 1283 (2017).

[13] See Kaspersky Lab, 909 F.3d at 458.

[14] See Nixon v. Adm’r of Gen. Servs., 433 U.S. 425 (1977).

[15] Id. at 473.

[16] Id. at 475–76.

[17] Id. at 478.

[18] See Kaspersky Lab, 909 F.3d at 454 (“In the last two centuries, legislatures have innovated beyond death and banishment.”).