VANCOUVER/TORONTO (REUTERS) - Huawei Technologies' chief financial officer Meng Wanzhou was dealt a setback by a Canadian court on Wednesday (May 27) as she tries to avoid extradition to the United States to face bank fraud charges.

Meng, a Chinese citizen, was arrested in December 2018 on a warrant issued by US authorities.

They accuse her of bank fraud for misleading HSBC about Huawei's relationship with a company operating in Iran, putting HSBC at risk of fines and penalties for breaking US sanctions on Teheran.

Meng's lawyers argued the case should be thrown out because Canada did not have sanctions against Iran.

But British Columbia's Superior Court Associate Chief Justice Heather Holmes disagreed, ruling the legal standard of double criminality had been met.

"Ms Meng's approach... would seriously limit Canada's ability to fulfill its international obligations in the extradition context for fraud and other economic crimes," Holmes said.

The ruling paves the way for the extradition hearing to proceed to the second phase starting June, examining whether Canadian officials followed the law while arresting Meng.

Closing arguments are expected in the last week of September and first week of October.

Reid Weingarten, a US lawyer for Meng, said Meng should"not be a pawn or a hostage" in the China-US relationship.

Ties between the two superpowers are deteriorating steadily amid disputes over trade and the future of Hong Kong.

"Today's ruling in Canada is only the opening salvo in a very long process... we are confident that ultimately justice will be done," Weingarten said.

Shortly after the ruling was released Meng, 48, arrived at the courthouse but made no comment.

Meng says she is innocent.

The Chinese embassy in Ottawa did not immediately respond to a request for comment. Huawei had no immediate comment.

The case has strained relations between Ottawa and Beijing.

Shortly after Meng's arrest, Beijing detained two Canadians on national security charges and halted imports of canola seed.

ICE canola futures dipped on Wednesday, giving up gains after the ruling.

The Global Times, published by the People's Daily, the official newspaper of China's ruling Communist Party, said the ruling "will make Canada a pathetic clown and a scapegoat in the fight between China and the US."

The US Department of Justice thanked Canada for its continued assistance.

Canada's justice ministry said its lawyers were committed to moving ahead as fast as possible.