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Meng Wanzhou, chief financial officer of Huawei, leaves for a lunch break during her extradition hearing at B.C. Supreme Court, in Vancouver on Aug. 13, 2021.Jimmy Jeong/The Canadian Press

Nearly three years after the RCMP arrest of Chinese executive Meng Wanzhou set off a crisis in Canada’s relationship with China, Ms. Meng’s legal team had its first opportunity in court to challenge the reliability of the case for extraditing her to the United States.

Ms. Meng, the chief financial officer of China’s biggest telecom company, Huawei Technologies Co. Ltd., is charged with fraud. The U.S. alleges Ms. Meng exposed a global bank, HSBC, to the risk that it would violate sanctions on Iran and be punished. Key to the allegation is a PowerPoint presentation she gave to the bank in 2013. The U.S. alleges she misrepresented Huawei’s connection to a related company, Skycom Tech Co. Ltd. She described them as partners; the U.S. says they were in effect one company. Both were doing business in Iran.

Lawyer Eric Gottardi, in an overview of Ms. Meng’s arguments that will unfold over three days, said there was no deception and no possibility that, because of Ms. Meng’s actions, HSBC was at risk of punishment over sanctions violations.

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In making that argument, he pointed to an affidavit from John Bellinger, a sanctions expert in Washington who has had presidential appointments to senior government positions. The Canadian Attorney-General, which is presenting the U.S. case against Ms. Meng, has accepted that he is an expert. Associate Chief Justice Heather Holmes of the B.C. Supreme Court, who is hearing the case, has said Mr. Bellinger knows more than she does about U.S. sanctions law.

“According to Mr. Bellinger’s uncontradicted evidence, it would be unprecedented for HSBC to be criminally prosecuted or held civilly liable for unknowingly violating U.S. sanctions,” Mr. Gottardi said. “Indeed, on this evidence, it is legally impossible for the victim of a fraudulent deception to be held criminally liable. And the risk of a victim being held civilly liable . . . is too remote, speculative and hypothetical to sustain a fraud prosecution.”

In any event, he said, there was “no deception.” Ms. Meng made clear that Skycom was “controllable” by Huawei. “How could a reasonable inference of intentional deceit regarding ‘control’ be drawn when she disclosed the ‘controllable’ nature of the relationship in the presentation itself?” he asked.

Frank Addario, who appeared for Ms. Meng after Mr. Gottardi, said Skycom was a partner of Huawei, and Canadian government lawyers were wrong to maintain HSBC needed to hear from Ms. Meng that the two companies were one and the same.

“First of all,” Mr. Addario said, “that is not legal terminology. They’re not one and the same. Sophisticated entities don’t use terms like that. It might suit for a colloquial expression by a lawyer seven years after the fact, or an FBI agent in a ROC [record of the case], but it’s not a substitute for evidence about what a sophisticated multinational bank wanted to know.”

Whether Huawei and Skycom were effectively the same company or business partners was, in any case, irrelevant to the sanctions risk, Mr. Gottardi said, citing Mr. Bellinger’s affidavit. “All that HSBC needed to know was that Huawei and Skycom were doing business in Iran,” Mr. Gottardi said. “That being the case, nothing said by Ms. Meng about that relationship was capable of giving rise to sanctions risk.”

And Huawei had taken measures, he said, to ensure its own, and Skycom’s, compliance with sanctions.

“There is simply no evidence to show in the ROCs that either Huawei or Skycom was non-compliant with sanctions,” Mr. Gottardi said. (The ROCs are documents in which the U.S. sets out the allegations and evidence for Canadian authorities.)

Evidence before Associate Chief Justice Holmes over the past two weeks has shown Ms. Meng was candid about doing business in Iran, and that some business in Iran is permissible, despite the sanctions. A sanctions violation may arise, however, when transactions in U.S. dollars are put through a U.S. office of a bank.

The U.S. government, in the case record, points to business dealings between Skycom and a British company, Networkers, which did telecommunications work in Iran for which Skycom paid it millions of dollars. The money was ultimately routed through HSBC in the U.S.

But Mr. Gottardi said Skycom paid the company in U.S. dollars from a Chinese bank, payments that went to HSBC in Britain. HSBC then chose to put the payments through a U.S. bank branch, he said.

It is not a violation of sanctions, Mr. Gottardi said, “to send Iran-related funds to a U.K. bank. That is all that Skycom did with respect to Networkers.” If anyone violated sanctions, he said, it was HSBC.

The extradition hearing is in the evidence phase. The government must show there is enough evidence to send the case to trial. That is a low bar. But Mr. Gottardi said it is the judge’s responsibility to provide a meaningful assessment of the evidence, under a 2006 ruling of the Supreme Court of Canada.

China has detained two Canadians, Michael Spavor and Michael Kovrig, for nearly 1,000 days, and has upheld the death penalty on a third, Robert Schellenberg, in apparent reprisal for the Dec. 1, 2018, arrest of Ms. Meng. She is free on bail.

The hearing will wrap up next week, but the judge is not expected to rule on extradition for months.

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