Huawei’s New FCC Lawsuit Against the U.S. Comes Amid Mounting Pressure Abroad—and at Home
Chinese tech giant Huawei is taking the U.S. government to court… again.
On Thursday, Huawei’s top legal representatives held a press conference announcing the company’s lawsuit against the U.S. Federal Communications Commission for “arbitrarily and capriciously” designating Huawei as a national security threat and banning government funds from purchasing Huawei equipment.
“The designation is simply shameful prejudgment of the worst kind,” said Glen Nager, outside council for Huawei, at the press conference. “The rule of law to which the United States adheres does not permit this kind of arbitrary and unfair action by a government agency.”
In late November, the FCC officially designated Chinese carriers Huawei and ZTE as “national security threats.” It meant Huawei, which was already blacklisted from buying American equipment as of May, was effectively banned from working with rural U.S. telecom carriers that rely on Huawei’s low-cost equipment.
“Both Huawei and ZTE have close ties to the Chinese government and military apparatus and are subject to Chinese laws requiring them to assist with espionage,” FCC Chairman Ajit Pai said in November, explaining why his agency designated the Chinese firms as national security threats. FCC funds “must not endanger national security through the purchase of equipment from companies posing a national security risk,” he said. (Telecoms can tap a special FCC fund to provide better Internet access to rural parts of the U.S.)
On Thursday, Huawei argued that removing Huawei’s equipment could be costly for the small American companies and communities with which it does business. Huawei representatives acknowledged that the financial impact of the FCC decision will be minimal for the company, yet they claim it puts Huawei’s reputation at stake.
“We are taking this legal action because the FCC has designated Huawei as a national security threat,” said Huawei Chief Legal Officer Song Liuping. “We think that it will bring about reputational losses, and that will bring about further losses on our business.”
Controversy—at home and abroad
In the last several months, Huawei has been at the forefront of a massive domestic rollout and international push of 5G technology. It announced the release of its own operating system, and released a new smartphone. Yet the company has also come under increasing pressure on domestic and international fronts.
Meng Wanzhou, Huawei’s chief financial officer and daughter of founder Ren Zhengfei, has been under house arrest in Canada for much of the last year while awaiting trial for an extradition case to the United States. In 2018, a U.S. court issued an arrest warrant for Meng, claiming that she defrauded financial institutions and aided Huawei in violating U.S. sanctions against Iran.
Meng and Huawei have denied the claims, and this week Meng issued an update on her situation, saying that while detention remains difficult, the warmth of her supporters “is a beacon that lights (her) way forward.”
Many in China, however, have commented that Meng’s detention in a Vancouver mansion pales into comparison to a recently imprisoned Huawei employee. After working for Huawei for 12 years, Li Hongyuan negotiated a severance package in 2018 but sued the company after he didn’t receive a bonus he says he’s entitled to.
Within a month, Shenzhen authorities detained Li for allegedly leaking Huawei’s secrets. (Li denies the accusation.) After spending 251 days in jail, he was released last week without charges filed against him. His story went viral on Chinese social media after court documents were released online and he penned a letter to Huawei president Ren Zhengfei.
Huawei released a statement on Monday arguing that he was not detained for any labor reasons. “We are obligated to report to the authorities if we find any suspicious, unlawful act and that is why we say it was not a case of labor dispute,” Song said at the news conference on Thursday.
Still, the controversy represents a unique domestic challenge for the Chinese technology giant that has grown more popular domestically in the last few years as the public has rallied behind their increasingly tense battles with U.S. authorities.
Li’s case has seemed to strike a particular chord with a growing white-collar, Chinese middle class, who for the first time may be anxious about declining growth and an intense (so-called 996) work culture. “We’ll never become Meng Wanzhou, but we could become the next Li Hongyuan,” one Chinese social media user said.
More must-read stories from Fortune:
—Want a SIM card in China? You’ll now need to get your face scanned first
—CEOs are facing fierce pressure on climate change—from their own kids
—2020 Crystal Ball: Predictions for the economy, politics, technology, and more
—In the wake of Brexit, Amsterdam is the new London
—These are the jobs artificial intelligence will eliminate by 2030
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.