China Mobile fights back in court against Gov. order to shut down

China Mobile Communications Group Co., Ltd. is going to court to fight an August order in council from the federal government that directed the company to shut down its Markham, Ontario-based Canadian operation within 90 days of the order. In an application for judicial review filed with the Federal Court on Tuesday, Chinese state-owned China Mobile argued that Innovation Minister François-Philippe Champagne erred in law by deciding that the company's Canadian business "may be injurious to national security," by failing to provide sufficient evidence for the conclusion. "The requirement, in the decision… that China Mobile divest itself of the Canadian business in its entirety is grossly disproportionate to any reasonably supportable findings and conclusions," China Mobile's filing argues. The order in council, which has not yet been published on the government's online database, was authored on Aug. 6, and communicated to China Mobile three days later, according to the court filing. China Mobile, the filing says, provides mobile communication services, but does not own or operate network facilities. Instead, the company has partnered with Telus Corp., and "simply distributes to its customers, primarily customers with a connection to both China and Canada, as Telus’s representative, services and products already offered by Telus." As part of this arrangement, China Mobile applied for, and received, a basic international telecommunications services (BITS) license from the CRTC in 2015, which the company says is valid through 2025. In October of 2020, China Mobile says it formally notified the minister of its existence, "having inadvertently not notified the minister of the establishment of the business at the time of incorporation in 2015 but having obtained the BITS License for the provision of services, and operated without issue since then." Over the next several months into January 2021, the minister issued a number of requests for information from China Mobile's Canadian business, and on Jan. 28, informed the company that an order for review on national security grounds had been made. In notifying China Mobile that it was reviewing the company on national security grounds, the minister included a summary of concerns, in which is wrote that the company and its subsidiaries "maintain several points of presence within Canada’s telecommunications infrastructure, including providing telephony services to individual customers, and offering general services to third parties in Canada." "As the Investor is a state-owned enterprise ultimately controlled by the Chinese state, this investment could result in the Canadian business being leveraged by the investor’s ultimate controller for non-commercial purposes, such as the compromise of critical infrastructure and foreign interference, to the detriment of Canada’s national security," the minister wrote, according to China Mobile's court filing. Through its responses to the minister's requests for information, China Mobile sought to explain that it "primarily provides non-telecommunications-related services, such as data and business support services," and that it has similar arrangements in many other countries around the world, including in the United Kingdom and the European Union, "where no national security concerns have been raised in relation to the above-described services." The company also told the government that it generates its revenue from the "provision of information and communication technology products and services to third party business customers," but does "not itself own or operate any telecommunications network facilities", but rather only basic routers, transmission, and switching equipment at three points of presence. Other than "office facilities for the operation of its basic marketing and sales activities, CMI Canada does not have a physical presence in Canada and does not anticipate having such a presence, whether through acquisitions or otherwise," China Mobile wrote in its court filing. None of the information provided stopped the government from ordering China Mobile to either divest entirely from the Canadian business, or "wind up" the Canadian business. The decision, China Mobile argues in its court filing this week, is unlawful because the minister "failed to meet the statutory threshold required to refer the decision to the Governor in Council." That threshold, the company continues, is under section 25.3(6) of the Investment Canada Act, and states that after the Innovation Minister has consulted with the Minister of Public Safety, the Innovation Minister shall refer a non-Canadian investment (like China Mobile's Canadian operation) to the Governor in Council for review if "the minister is satisfied that the investment would be injurious to national security, or on the basis of the information available, the minister is not able to determine whether the investment would be injurious to national security." The order compelling China Mobile to divest from or wind down its Canadian operations, China Mobile argues, simply reads that the company "may be subject to the influence or demands of, or control by, a foreign government" and "may disrupt or otherwise compromise Canadian critical telecommunications infrastructure," and "may gain access to highly sensitive telecommunications data and personal information that could be used for non-commercial purposes as military applications or espionage." "The information collected by the Minister from the Canadian Business does not support a conclusion that the Investment could – let alone would – be injurious to national security. There is no evidence on the record or in the Minister’s findings and conclusions that supports this assertion," China Mobile argues. The company does not have access to any sensitive data or personal information, "other than basic, non-verified, and limited contact information." China Mobile goes on to argue that "it is clear from the current political socio-economic climate and the general biases against Chinese state owned companies, along with the lack of evidence to support the decision, that the Governor in Council arrived at his decision, in part, for reasons unrelated to the establishment of the Canadian business and national security." The company is asking the court to either set the decision aside entirely, or refer it back to the minister and Governor in Council, or grant China Mobile "sufficient time to complete the remedial steps required by the decision, given that the timelines provides insufficient time to conduct an orderly divestment," and is also asking for a stay of the order while the case is considered. — Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Jenna Cocullo at jcocullo@thewirereport.ca

China Mobile fights back in court against Gov. order to shut down

News | 09/09/2021 6:23 pm EDT

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