A Government committee has raised concerns about the role Huawei has played in helping BT build out part of the UK's critical national infrastructure (CNI).
The Chinese telecommunications firm signed a supplier deal with BT in 2005, where it agreed to provide routers and other transmission equipment to help the firm expand its network.
However, a report by the Intelligence and Security Committee suggests Huawei's involvement in the project should have been closely scrutinised by Government ministers before being given the go ahead.
This is partly related to allegations about Huawei's close links to the Chinese state, which the company has strenuously denied, and the potential impact this could have on the UK's national security.
"BT first notified Government officials in 2003 of Huawei's interest in the 21st Century Network contract. However, the Committee has been told by the Cabinet Office that officials chose not to refer the matter to Ministers," the report states.
"There was no justification for failing to consult Ministers...Such a sensitive decision, with potentially damaging ramifications, should have been put in the heads of Ministers."
The report claims the BT-Huawei case highlights a number of weaknesses in the UK's CNI deployment policies, and suggests a disconnect between the UK's inward investment rules and its take on national security.
Part of the problem is that there is no requirement for the owners of CNI assets to consult the Government on who they would like to do business with, the report points out.
"Instead, the Government relies on informal processes or the private company taking the initiative themselves," the report states.
"This is far too haphazard an approach, given what is at stake...[and means] the Government may not be made aware of contracts involving foreign companies from potentially hostile states until they have already been awarded."
In this instance, BT did inform the Government of Huawei's potential involvement some years earlier, but the report said there are no processes in place to ensure Ministers are consulted in cases like this.
"The failure in this case to consult Ministers seems to indicate a complacency which was extraordinary given the seriousness of the issue," the report continues.
In a statement, Huawei said it had jumped through multiple hoops to get its equipment approved for use by BT.
"Prior to BT's selection of Huawei in 2005, Huawei was subject to a comprehensive audit across 11 different areas, including strategic development, management systems, corporate social responsibility and security management," it states.
"This detailed audit took two years and only when it had been completed did BT sign its first contract with Huawei.
"Since then, BT has continued to conduct a thorough annual evaluation of Huawei and after eight years of partnership, we have built a strong and mutually beneficial relationship with them," the statement reads.
The company also claims the UK Government regularly reviews Huawei's product engineering, procurement and supply chain security management policies.
"Huawei is willing to work with all governments in a completely open and transparent manner to jointly reduce the risk of cyber security," the statement continues.
