EU’s Huawei hardliners get top court backing

EU efforts to ban Huawei from 5G networks won the backing of a top court advisor Thursday, in a legal opinion that is likely to galvanize security hawks seeking to restrict Chinese tech in Europe.

A lawyer for the EU’s top court in Luxembourg said rules blocking telecom operators from using risky suppliers can be set by the EU, not just national governments. They also said telecom operators don’t need to be compensated for the cost of replacing Huawei equipment.

It’s a blow for Europe’s telecom giants, which have pushed back against banning China’s Huawei from 5G procurement and have told EU officials that large-scale bans are an “act of self-harm” that could even bring down networks.

It is a win for China hawks, who have fought to impose tougher measures against Huawei — with strong backing from Washington. The EU has spent years trying to persuade national governments to voluntarily kick out Huawei and ZTE over concerns that their presence in European telecom networks could enable large-scale spying and surveillance by the Chinese government. It is now working on broader rules that seek to reduce the bloc’s reliance on foreign “high-risk” suppliers and limit foreign government control over its digital networks.

The case was brought by Estonian telecom operator Elisa, which is seeking compensation for the costs of removing Huawei and is challenging whether the EU has the competence to ask for restrictions on Chinese vendors.

Thursday’s opinion said national security authorities can follow EU guidance when imposing bans on Huawei. The Court of Justice is expected to issue its final ruling on the case later this year, and may take the opinion from Advocate General Tamara Ćapet into account.

Laszlo Toth, head of Europe at global telecom lobby association GSMA, said in reaction that “blanket rip-and-replace mandates are an unreasonable approach to what is a highly nuanced situation.” The industry considers national security measures should remain the responsibility of national governments, he said.

Huawei said the opinion “recognizes that all restrictive measures with regards to telecom equipment must be subject to judicial review, under a strict standard of proportionality” and that “decisions cannot rest on general suspicion … but must be based on a specific assessment.”

“We expect EU or national restrictions to be scrutinized under this principle,” Huawei said.

Boon for Brussels

Progress towards an EU-wide ban has been sluggish, with many national governments dragging their feet, in part due to fears of Chinese trade retaliation.

European Commission Executive Vice President Henna Virkkunen told POLITICO in January that she is “not satisfied” with voluntary efforts by EU capitals to kick out Huawei. The EU executive now wants binding rules, laid out in a proposal in January.

Large telecom players in Europe have pushed back hard against restrictions on Huawei, arguing that blocking risky vendors is a national security measure — an area handled exclusively by national governments.

Efforts to clamp down on risky vendors should respect “the competence of member states for national security matters,” industry group Connect Europe said in January.

Thursday’s opinion suggests operators will have a harder time fighting the bans. 

It also bodes badly for operators hoping to get compensated for ripping out Huawei equipment. Many have sought financial support and compensation for the measures, which they say add massive unexpected costs to network rollouts.

The EU executive previously estimated that phasing out “specific high-risk equipment” would cost between €3.4 billion and €4.3 billion per year for three years.

Only if the burden for replacing Huawei is “disproportionately heavy,” could telcos seek compensation, according to the opinion.

Elisa said it welcomed the legal recommendation that all decisions made on the grounds of national security should still be subject to judicial review. It said the restrictions in Estonia “amounted to a deprivation of its ownership rights … as the impacted equipment has become unusable” and that Elisa “already swapped the majority of its network equipment to Nokia.”

Chinese vendor ZTE, the smaller rival of Huawei, did not respond to a request for comment.

Mathieu Pollet contributed reporting.