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The U.S. Justice Department is accusing Meng Wanzhou, seen here on Jan. 23, 2020, the chief financial officer of Huawei Technologies Co. Ltd., of fraud, saying she lied to banks about her company’s conduct in an attempt to evade U.S. sanctions against Iran.DON MACKINNON/AFP/Getty Images

A lawyer for Chinese executive Meng Wanzhou told a B.C. Supreme Court judge that the U.S. request for her extradition poses a unique test of Canadian values, because it touches on the independence of this country’s foreign policy.

The U.S. Justice Department is accusing Ms. Meng, the chief financial officer of Huawei Technologies Co. Ltd., of fraud, saying she lied to banks about her company’s conduct in an attempt to evade U.S. sanctions against Iran. Ever since the RCMP arrested her on Dec. 1, 2018, China has bitterly confronted Canada, accusing it of being a stooge for the United States. China has detained two Canadians in the wake of her arrest and suspended some agricultural imports. (Ms. Meng, meanwhile, has been free on bail.)

The first stage of the extradition hearing is to determine whether the crime Ms. Meng is accused of in the U.S. also exists in Canada. The Canadian government, presenting the case on behalf of the U.S., says it is a case of fraud, which is an offence in Canada, too; Ms. Meng’s defence team says it is about sanctions evasion, and Canada has no such sanctions at the moment.

Lawyer Richard Peck said sanctions are not part of “general law,” which includes crimes such as rape and murder and do not vary between most countries, but are elements of “political law.” And Canada chose to drop economic sanctions after Iran signed an agreement with the United States and other countries in 2016 to put limits on its nuclear program. But then, Mr. Peck told Associate Chief Justice Heather Holmes, Mr. Trump “tore it up” in 2018.

“Canada chose not to follow suit. Canada had removed its sanctions in February, 2016, along with the rest of the civilized world. The outlier was the United States. So we made a deliberate sovereign legislative choice.”

He called the extradition proceedings against Ms. Meng a unique case because in Canada, a lie can be called a fraud only if it causes economic harm – and any harm Ms. Meng allegedly caused banks was solely, he said, because of a U.S. law (the sanctions) that does not exist in Canada.

In a document filed Thursday with the court, Ms. Meng’s legal team warned that accepting the Canadian government’s case “would send a message to the Canadian public that our government is willing to extradite individuals to face prosecution for offences where such prosecution is antithetical to Canadian values, interests and policy.”

Associate Chief Justice Holmes told the court that she would reserve her decision. There is no timeline for when she will make her ruling. She thanked Ms. Meng’s legal team and federal government lawyers for what she described as excellent submissions.

If she rules that the offence Ms. Meng is accused of is not a crime in Canada, the extradition proceedings would be over (unless overturned in an appeal). If Ms. Meng loses this stage of the proceedings, the defence intends to argue “an abuse of process,” based on alleged violations of her rights when arrested, and on alleged political motivations for her prosecution in the U.S.

That stage is now scheduled for next June, but could be delayed. If the court rules against that defence claim, evidence would be heard, possibly next fall, on whether she committed the crime she is accused of. Only if the courts rule that Ms. Meng can be extradited does the case return to Justice Minister David Lametti for a final decision.

Mr. Peck’s comments on Thursday were part of the defence reply to federal lawyer Robert Frater, who addressed the court a day earlier. Mr. Frater argued that “common sense” suggests that lies from businesses seeking loans are harmful to banks, and that makes this case simply about fraud, not sanctions.

While Associate Chief Justice Holmes did challenge the defence argument about harm during the four days of court hearings this week, she also raised questions about the offence of fraud, suggesting it can be applied in a wide variety of contexts, some of which might be objectionable to Canadians.