Chinese-controlled company challenges Ottawa’s order to divest assets for security reasons

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OTTAWA – The Liberal government has ordered a Chinese state-owned telecommunications company to divest its stake in a Canadian subsidiary on national security grounds, leading to a legal challenge to the order.

OTTAWA – The Liberal government has ordered a Chinese state-owned telecommunications company to divest its stake in a Canadian subsidiary on national security grounds, leading to a legal challenge to the order.

China Mobile International Canada is asking the Federal Court to overturn the recent ruling, saying the government has no reason to believe the company would compromise security or engage in espionage on Beijing’s behalf.

CMI Canada says the Trudeau government was motivated, at least in part, by “the current political socio-economic climate and general prejudices against Chinese state-owned enterprises.”

The case is set amid high tensions between Ottawa and Beijing over China’s prolonged detention of Canadian citizens Michael Kovrig and Michael Spavor for suspected espionage.

China’s actions against Spavor and Kovrig are widely seen in the West as retaliation for the arrest at the end of 2018 by Canadian authorities of Meng Wanzhou, an executive at Chinese company Huawei Technologies, so that she can be extradited to the United States. United to face charges of fraud.

CMI Canada’s application filed this week in Federal Court reveals details of an investment screening case that has been quietly taking place out of public view over the past year.

The company, established in 2015, provides mobile communication services, including prepaid calling plans, but does not own or operate telecommunications network facilities itself. Instead, it partnered with Telus Communications Inc. for the provision of wireless services through the Telus network.

CMI Canada says it inadvertently failed to notify the federal government of its presence as a new Canadian company until October of last year. A series of requests for information from federal officials quickly followed.

The Investment Canada Act and the National Security Investment Review Regulations allow the federal government to scrutinize an investment in Canada by a foreign company.

In January, the government informed CMI Canada of a review for security reasons, saying the investment could result in the Canadian company being operated by the Chinese state “for non-commercial purposes, such as compromise of critical infrastructure and foreign interference, to the detriment of Canada’s national security.

Following further information exchange, the government issued an order on August 9 directing China Mobile to either divest itself entirely or liquidate the Canadian company within 90 days.

CMI Canada argues that the finding “amounted to speculation about what the Canadian company might do,” such as using its supposed access to sensitive information for “military applications or espionage.”

The company argues that Ottawa could not reasonably have concluded, based on the information available, that the investment would be detrimental to Canada’s national security.

It indicates that the company does not own or operate any transmission facility in Canada, does not have privileged or direct access to critical infrastructure, and does not have access to any sensitive telecommunications data or personal information, other than basic coordinates.

CMI Canada is asking the tribunal to overturn the federal decision or, alternatively, to return the case to the government for reconsideration. He also wants the order to be suspended pending the outcome of the case and any appeal.

If the decision is not put on hold, the company will be forced to leave “the Canadian landscape entirely. This would require the termination of its customers and its operations,” says the application.

The federal government has yet to file a response and no date has been set for a hearing.

This report by The Canadian Press was first published on September 11, 2021.

Jim Bronskill, The Canadian Press


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