As in many functioning democracies, Sweden separates its legislative, judicial, and executive branches of government. Following a 2019 law that allows a security-based exclusion of vendors from Swedish national infrastructure, Sweden's telecom regulator barred Huawei from providing equipment for Sweden's 5G network. Exploiting Sweden's separation of the branches of government, Huawei is now using the legal system to preserve its operations in Sweden.
Starting around 2015, the relationship between Sweden and China has been on a downswing. These relationships deteriorated when Chinese agents kidnapped Gui Minhai - a naturalized Swedish citizen - in Thailand and forced him to confess to vague crimes in mainland China [1], [2], [3], [4].
Gui was born in mainland China and obtained Swedish citizenship after the Tiananmen Square massacre. In the process, Gui renounced his Chinese citizenship. Subsequently, Gui went back to China and set up a bookshop in Hong Kong with four other partners. He also published several books on characters in the Communist Party of China (CCP). Over time, all five of the partners in the bookshop were arrested and charged with (seemingly) made-up crimes [1].
Since Gui's kidnapping, Swedish officials have been advocating on his behalf to the Chinese government with little success. Since the kidnapping, he has been detained, denied access to a lawyer, and not allowed to meet the Swedish consular officials in China. The judiciary in China is not independent of the legislative or executive branches of government. Thus, there is no mechanism internal to the Chinese government that would bring him to a fair trial or secure his release [1], [5].
As a result of the coverage of the affair in Sweden, Swedish public opinion of China declined, and inter-governmental relations became strained [6].
In 2019, Sweden adopted an electronic communications law that enabled the country to exclude vendors from national infrastructure based on security considerations. This law came into effect on January 1, 2020. The law gave the Swedish Armed Forces and Swedish Intelligence (Sapo) a say in the selection of vendors for 5G infrastructure [7], [8], [9], [10].
While the law was inspired by concerns about Huawei in other democratic countries (most notably in the U.S. and Australia), China's poor relationship with Sweden was likely a factor as well [4], [6].
In October 2020, the Swedish Post and Telecom Authority - the telecom regulator - barred Huawei and ZTE from participating in Sweden's 5G infrastructure. The ban was based on the 2019 law and implemented on the recommendation of the Swedish Armed Forces and Sapo [7], [8], [9], [10].
Sapo's stance on Huawei was unsurprising as it had long been concerned about Chinese espionage activities in Sweden [11], [12].
In November 2020, immediately after the telecom regulator's decision, Huawei filed a complaint with a Swedish court to overturn the regulator's decision. The complaint prevented the regulator from proceeding with a 5G spectrum auction to telecom operators - an early step in the process of deploying 5G infrastructure [13].
The court ultimately allowed the auction to continue but also allowed Huawei to continue the legal process. However, in January 2021, the court upheld the regulator's ban from the 5G network [13].
In April 2021, Huawei filed an additional appeal to continue its use of the legal system to preserve its Swedish business. In June of the same year, the courts again upheld the regulator's ban [13].
In October 2021, Huawei filed yet another appeal against its ban. This appeal is pending review at the time of this writing [14].
Ericsson is a Sweden headquartered telecom equipment vendor that competes directly with Huawei and ZTE. Two other telecom vendors, Nokia (headquartered in Finland) and Samsung (headquartered in South Korea), make up the remaining well-known vendors for 5G infrastructure. All three of Ericsson, Nokia, and Samsung are headquartered in democratic countries. While they have to adhere to national laws imposed by their respective governments, they also have the freedom to challenge governmental actions in the courts or in the press.
In China, the telecom companies building out 5G networks are state-directed. Companies such as China Mobile do not operate independently and hand out market share to competing companies (partially) based on the Chinese government's direction. The market shares allocated to various companies are not subject to independent regulator review. Also, they cannot be challenged via an independent judiciary.
In 2020, China Mobile allocated Ericsson an 11% share of its 5G equipment spend. However, following the ban on Huawei in Sweden, a 2021 buildout allocated 2% of spending to Ericsson. Finally, another buildout initiated in October 2021 allocated a 0% share to Ericsson.
Another 5G network being jointly built by China Telecom and China Unicom shows a similar trajectory. Ericsson was allocated 3% of the spend in August 2021 [15], [16], [17a].
Ericsson's CEO has come to Huawei's defense and urged the various Swedish branches of government not to ban Huawei in Sweden's 5G network. Ericsson's defense of Huawei is based purely on its own interest in preserving market access in China. In his defense of Huawei, Ericsson's CEO does not provide a method for Sweden to safeguard national infrastructure. Nor does Ericsson's CEO address the asymmetry in applying rules and laws - Huawei can and does openly challenge the Swedish regulator's ban. Still, Ericsson has no opportunity to challenge the market share handed out by China Mobile at the Chinese government's direction.
Similarly, Ericsson had stayed silent when other democratic countries such as the U.K. and the U.S. banned Huawei and ZTE. Ericsson stood to gain from those bans as the bans increased Ericsson's odds of being selected for the 5G buildout in those countries. Only when Sweden banned the two Chinese companies did Ericsson speak out to preserve its revenue in China [18].
There is an obvious asymmetry between Sweden and Ericsson on the one hand and China and Huawei on the other. Sweden separates its judicial, legislative, and executive branches of government. Ericsson (by being headquartered in Sweden) is regulated by the government, but only loosely. Regulations and laws that apply to Ericsson typically also apply to other Swedish, European, and U.S. companies doing business in Sweden.
In contrast, a single unelected entity - the CCP - directs China's judicial, legislative, and executive branches of government. By extension, the CCP directs the activities of Huawei and Chinese telecom operators such as China Mobile [19], [20].
For years Huawei has benefitted from being treated as a private enterprise in Sweden and other democratic countries. Huawei has been able to access the market in Sweden and the legal system to protect its business interests. Ericsson in China has no such recourse and is at the mercy of the CCP for its business interests.
Now that Sweden has begun treating Huawei as a CCP directed enterprise and its access to the Swedish market is about to be cut off, Huawei is trying to protect its (and the CCP's) interests by using Sweden's legal system. One wonders if Sweden's (and other countries') legal system should be reformed to treat foreign state-directed enterprises (especially those from autocratic countries) differently from other foreign private enterprises (especially those from democratic countries).
[1]: Gui Minhai. Wikipedia. (Retrieved from https://en.wikipedia.org/wiki/Gui_Minhai) October 27, 2021.
[2]: Gui Minhai's last days in Thailand. Safeguard Defenders. December 16, 2020.
[3]: How China Used the Swedish Ambassador to Threaten Angela Gui. Jojje Olsson. The Diplomat. March 28, 2019.
[4]: Is Sweden Ready to Combat China's Influence Operations? Jojje Olsson. The Diplomat. July 20, 2020.
[5]: Swedish Press Jointly Urges China to Free Detained Bookseller Gui Minhai. Charlotte Gao. The Diplomat. June 8, 2018.
[6]: What Do Swedes Think about China? Tim Ruhlig et al. The Swedish Institute of International Affairs. August 2020.
[7]: Sweden Becomes Latest – and Among Most Forceful – to Ban Huawei From 5G. Shannon Tiezzi. The Diplomat. October 21, 2020.
[8]: Sweden bars Huawei and ZTE from upcoming 5G networks. Reuters. October 20, 2020.
[9]: Sweden bans Huawei, ZTE from 5G, calls China biggest threat. Kelvin Chan. Associated Press. October 20, 2020.
[10]: No Huawei for bidders in Sweden's 5G auctions. Padraig Belton. Light Reading. October 20, 2020.
[11]: Säpo: Suspected spies found working in Swedish agencies. Radio Sweden. March 16, 2017.
[12]: Säpo chief: Russia, China and Iran biggest threats. MSN.com. April 24, 2021.
[13]: Huawei loses in Swedish courts over 5G again. Light Reading. June 23, 2021.
[14]: Huawei appeals Sweden's ban on company for selling 5G gear. Supantha Mukherjee. Nasdaq.com. October 1, 2021.
[15]: Ericsson is on the ropes in China but thriving elsewhere. Light Reading. July 16, 2021.
[16]: China Mobile shuts out foreign vendors from $1.2B 5G tender. Light Reading. October 4, 2021.
[17]: Back off or Ericsson gets it, China reportedly tells Sweden. Light Reading. May 11, 2021.
[17a]: China sidelines foreign vendors in giant 5G tenders. Light Reading. August 3, 2021.
[18]: Ericsson turns Huawei lobbyist with China business at stake. Light Reading. January 7, 2021.
[19]: Who Controls Huawei? Implications for Europe. Tim Ruhlig. The Swedish Institute of International Affairs. May 2020.
[20]: What to Make of the Huawei Debate? 5G Network Security and Technology Dependency in Europe. Tim Ruhlig and Maja Bjork. The Swedish Institute of International Affairs. January 2020.
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