Meng Wanzhou loses in BC Supreme Court

Meng Wanzhou lost her bid to end extradition proceedings on the grounds that her acts, as alleged, would not constitute crimes in Canada. The case turned on how narrowly to define “the acts”. The court found that the very narrow definition sought by Meng was neither supported by precedent or practice in Canada and sister jurisdictions, nor good policy.

The British Columbia Supreme Court issued its decision today on Meng Wanzhou’s application to end the extradition proceedings on the grounds of lack of “double criminality.” She lost. This is just one round in the proceedings, and her losing does not involve any judgment on the truthfulness of the allegations against her. I don’t know enough about Canadian extradition law to know what the next round involves, but here’s an explainer of this one.

The requirement of double criminality means that the act the accused is alleged by the foreign state (which I’ll call the requesting state) to have committed must also be a crime in the extraditing state (which I’ll call the sending state) in order for extradition to proceed. If cheating on your taxes is a crime in both the requesting state and the sending state, no problem. Offensive speech, on the other hand, would be a good example of something that could be a crime in one state but not in another.

The problem with applying the double criminality requirement lies in the level of generality at which to define the offense. Take tax dodging. Suppose I don’t report income from a stock sale in the US, and I’m in Country X, which has an income tax system that penalizes false reporting, but which doesn’t tax income from stock sales. The US seeks extradition. Is the offense “failure to report income from a stock sale”? Or is it “failure to report taxable income”? The defendant will want to characterize the offense as narrowly as possible; the requesting state will want to characterize it as broadly as possible.

Now to the allegations in the Meng case: She is alleged to have misrepresented to HSBC (a bank) Huawei’s relationship with another company called Skycom, claiming the latter was independent of Huawei when in fact it was closely connected. Skycom had extensive dealings with Iran. As a result, HSBC continued engaging in financial transactions with Huawei, exposing it to US sanctions (because it was assisting Huawei in doing business with Iran via Skycom).

Meng’s basic argument is that even if the facts as alleged were true (and in this proceeding, the court had to accept them as true), they didn’t amount to a crime in Canada: although there was lying, there wasn’t even potential deprivation (i.e., damage) to HSBC (a necessary element of the crime of fraud), because Canada didn’t have sanctions in place against Iran and thus wouldn’t have sanctioned HSBC. To take the sanctions into account in determining whether fraud had occurred would, Meng argued, amount to improperly making US law determinative of whether the acts were an offense in Canada:

Ms. Meng submits that such conduct could not amount to fraud in Canada because there could be no deprivation, Canada having no laws or regulatory scheme preventing banks from doing business with Iran-based entities.  A misrepresentation about an Iran-based affiliate would be legally and factually irrelevant. (Para. 59)

Not so, said the court. The key paragraphs are 61 and 62:

[61]         Consider this. A domestic prosecution for fraud could properly, I suggest, take place in Canada on the basis of false statements made in Canada that put a US bank at economic risk for violating US sanctions.   Nothing about our law of fraud would prevent reference to US law to explain how the US bank was put at risk, in order to establish deprivation.  Nor would it matter to our law of fraud that the victim was a foreign entity, so long as sufficient events occurred in Canada to establish jurisdiction to prosecute in Canada.  Canada’s law of fraud looks beyond international boundaries to encompass all the relevant details that make up the factual matrix, including foreign laws that may give meaning to some of the facts.

[62]         Since a domestic prosecution could in this way rely indirectly on the effects of US law, it is difficult to understand why the domestic aspect of a double criminality analysis in an extradition proceeding should not do so as well.

This seems like an unanswerable argument to me. The question is whether the actions exposed HSBC to risk, not the reason that risk existed. US law created a fact that has to be taken into account like any other fact. Suppose I am a US citizen and resident. My lawyer knows that under the law of Country Y, I can be prosecuted for something I did, and yet in response to a specific question fails to warn me against traveling to Country Y. I then go to Country Y, get arrested, and suffer damages. Is my malpractice suit barred because US courts must pretend that the law of Country Y doesn’t exist and had nothing to do with my damages? Meng’s argument suffers from the further deficiency that it would not apply if the US punished HSBC not as a matter of law, but merely as a matter of lawless arbitrariness. The point is not what US law says; it’s whether the deceit actually exposed the bank to harm for any reason. Thus, we don’t need to answer the question of whether some potential damage is inflicted pursuant to law or not.

The court was concerned that the narrow approach sought by Meng would, particularly in the case of fraud, make extradition extraordinarily difficult:

Ms. Meng’s approach to the double criminality analysis would seriously limit Canada’s ability to fulfill its international obligations in the extradition context for fraud and other economic crimes.  The offence of fraud has a vast potential scope.  It may encompass a very wide range of conduct, a large expanse of time, and acts, people, and consequences in multiple places or jurisdictions.  Experience shows that many fraudsters benefit in particular from international dealings through which they can obscure their identity and the location of their fraudulent gains.  For the double criminality principle to be applied in the manner Ms. Meng suggests would give fraud an artificially narrow scope in the extradition context.  It would entirely eliminate, in many cases, consideration of the reason for the alleged false statements, and of how the false statements caused the victim(s) loss or risk of loss. (Para. 82)

Needless to say, the Chinese authorities are unlikely to appreciate the subtleties of the court’s reasoning. Projecting their own system onto others, they will see it as a policy decision by the Trudeau government to keep the Meng case going. After all, that’s what they are doing with the cases of Michael Kovrig and Michael Spavor, which should under Chinese law have gone to trial months ago.

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