Ninth Circuit upholds FCC revocation of Chinese telecommunications company’s US operating certificates

(CN) — A Ninth Circuit Appeals Panel ruled 2-1 Tuesday that the Federal Trade Commission had the right to revoke certificates authorizing a Chinese state-owned telecommunications operator from providing service in the U.S. over national security concerns.

China Unicom Operations Limited, a California corporation owned by the Chinese government, filed a petition for review of the FCC’s 2022 revocation order, arguing that the commission lacked statutory authority to revoke China Unicom’s telecommunications certificates, that its decision to do so was arbitrary and capricious and that it revoked the certificates without following proper procedures.

U.S. Circuit Judge Daniel Collins, a Donald Trump appointee, wrote in the majority’s 90-page order that the FCC had Congressional authority under the Communications Act to revoke certificates for “national defense” purposes.

The majority determined that the decision to revoke China Unicom’s certificates was sound because the “national defense” factor gives the FCC the authority to determine present or future harm when authorizing or revoking certificates.

The decision will likely cause China Unicom’s millions of customers to lose connectivity with or throughout the U.S.

“The relevant Executive Branch agencies explained how the national security situation has changed over the last two decades vis-à-vis China, which now represents an increased threat to the United States in terms of potential economic espionage, cyberattacks, and intelligence-gathering efforts,” Collins wrote. “Substantial evidence supports the FCC’s conclusion that CUA’s ultimate Chinese government ownership as well as the significant overlap among its board members with those of its parent entities and the CCP itself leave it particularly vulnerable to Chinese government influence, exploitation, and control.”

Collins also wrote that the FCC properly concluded that there are “significant concerns” that recently-enacted Chinese cybersecurity and intelligence laws could require Chinese companies, including China Unicom’s indirect parents, to assist the Chinese government’s intelligence-collection efforts.

“Although CUA insists that it is not itself directly subject to these laws, the agency permissibly concluded that CUA’s ownership by entities that indisputably are subject to such laws presents a material national security risk to the United States,” Collins wrote, noting that China Unicom’s infrastructure and capabilities provide its parent entities and the Chinese government with opportunities to access, monitor, store, disrupt and misroute U.S. communications in ways that are not authorized and that can facilitate espionage and other activities, including U.S. government communications to international destinations.

Collins also chided China Unicom’s lack of candor and trustworthiness over the course of the proceedings, writing that it tried to hide the fact that the board directors of its parent company were members of the Chinse Communist Party.

“CUA failed to adequately address the fact that its indirect parent entities were required to comply with Chinese laws and government directives, including certain Chinese cybersecurity and intelligence laws,” Collins wrote.

Collins was joined on the majority by U.S. Circuit Judge Daniel Lee, a fellow Trump appointee.

But Senior U.S Circuit Judge Carlos Bea, a George W. Bush appointee, in his dissent, wrote that he did not believe the FCC had revocation authority without direct outside intervention and that China Unicom had a right to provide telecommunications services pursuant to its issued certificates. 

“Congress has stated the particular powers that the FCC possesses under the Act. Revocation authority of previously issued telecommunications certificates upon the sole initiative and action of the Commission, but without judicial proceedings and authorization, is not one of them. No proper statutory construction can make that so. That reason should dispose of the matter before us,” Bea wrote.

He noted that he would have vacated the FCC’s revocation order and remanded with instructions to reinstate the operational certificates.

China Unicom did not respond to requests for comment on the ruling. The FCC also did not reply to requests for comment.