CHINA WATCHHow Chinese Companies Are Challenging National Security Decisions That Could Delay 5G Network Rollout
In many countries, governments have decided to block Chinese companies from participating in building communication infrastructure in their countries because of national security concerns. Chinese companies and investors often refuse to take such national security changes lying down. With varying degrees of success, firms have mounted a range of formal and informal challenges in recent years.
British prime minister Rishi Sunak recently declared that the “golden era” of UK-China relations is over. The next day, the government removed China General Nuclear Power Group, a Chinese state-owned company, from the construction of the UK’s Sizewell C nuclear power station.
Other countries have made similar moves in recent years. In 2020, for example, then-US president Donald Trump attempted to ban social media platform TikTok in the US. The move was subsequently stopped by two US judges following a lawsuit by TikTok, and eventually dropped by current president, Joe Biden.
But such government decisions based on national security concerns could affect the future international growth of Chinese business. This is particularly important given that international investment and trade by China has increased in recent years, enabling it to emerge as a powerful challenger to the global economic order.
Indeed, Chinese companies and investors often refuse to take such national security changes lying down. With varying degrees of success, firms have mounted a range of formal and informal challenges in recent years. This includes lobbying, media campaigns and diplomatic assistance or support from business associations, but also contesting national security decisions in domestic courts.
A relatively new strategy for China, however, is to challenge national security decisions before international tribunals using a method called investor-state dispute settlement. These tribunals are usually set up to handle specific disputes, with arbitrators appointed and paid for by one or both of the parties involved. The suits tend to claim that national security decisions have breached host countries’ obligations to Chinese investors under bilateral investment treaties (BITs). These treaties grant foreign investors certain standards of treatment and allow them to sue host states for alleged violations.
Most recently, Chinese tech giant Huawei made an investment treaty claim against the Swedish government over its exclusion from the rollout of the country’s 5G network. And my research shows that Huawei’s legal challenge to Sweden’s ban might only be the tip of the iceberg since Huawei equipment is also currently banned in other countries that have signed BITs with China. In the UK, for example, the government has committed to exclude Huawei’s technology from the country’s 5G public networks by the end of 2027.
The outcome of Huawei’s dispute with Sweden could affect public interest there and in other countries like the UK. If the tribunal finds in Sweden’s favor, preventing the use of Huawei equipment could delay 5G rollout by years and inflate prices for mobile phone users.
