On June 22, 2022, the Administrative Court of Appeals in Stockholm (Kammarrätten i Stockholm) upheld the Swedish Post and Telecom Authority (PTS) decision to ban Huawei and Huawei products from a 2020 public procurement bid for national security reasons. (Joint Case 5222-21 and 5223-21.)
Background to the Decision
In 2020, Sweden announced it was holding a public procurement bid on the development of its 5G network. On October 20, 2020, the Swedish PTS decided that in in the interest of national security and on the basis of advice from the Swedish Security Police (Säkerhetspolisen, Säpo) and the Swedish Armed Forces, bids could not include Huawei products or technology. The Swedish Security Police and the Armed Forces determined that Huawei, a private Chinese corporation, was under the influence of the Chinese government and could be pressured into spying and conducting other surveillance activities against Sweden or targets in Sweden on behalf of the Chinese government. (PTS Decision at 6.)
In response to the ban, Huawei asked the Administrative (District) Court in Stockholm for an inhibition in order to prevent the public procurement from going forward. The request for inhibition was granted by the administrative district court but appealed by the PTS.
On December 16, 2020, the Administrative Court of Appeals in Stockholm issued a decision lifting the inhibition, arguing that the national security grounds that formed the basis of the Huawei ban and the 5G expansion were both so important that they outweighed the interest of Huawei, and that there was therefore no reason for upholding the inhibition. (Administrative Court of Appeals in Stockholm, RK 2020:2, Case No. 7432-20.) The court did not address Huawei’s appeal regarding the conditions of the permits (tillståndsvillkoren), which at that time were litigated before the district administrative court and subsequently accepted by the district administrative court.
The bid was carried out and completed in January 2021.
On March 5, 2021, the Administrative Court of Appeals in Stockholm declined to grant leave to appeal and declared it would not hear Huawei’s appeal with regard to the decision to not grant an inhibition because the underlying decision on whether excluding Huawei from the bid was concurrently being tried by the district administrative court.
Issue Before the District Administrative Court
After the bid was completed, the Administrative (District) Court in Stockholm heard Huawei’s claims regarding the restrictions on the rules of the bid in two joined cases. On June 22, 2021, the district administrative court announced that it was upholding the PTS decision to prohibit Huawei products in the Swedish 5G network, citing national security concerns, and declared that the prohibition may continue to apply henceforth. (Joint Case No. 231-20 and 2378-21.) That decision was appealed to the Administrative Court of Appeals in Stockholm, the final instance in these cases, which on June 22, 2022 upheld the district administrative court’s decision.
Legal Framework of the Decision
Under Swedish law, public procurement may typically not discriminate among participants, and public agencies are, among other provisions, specifically subject to the Administrative Procedural Act and the Administrative Act. (28 § Förvaltningsprocesslag (1971:291); 41 § Förvaltningslag (2017:900).)
Moreover, procurement with regard to electronic communications, which include 5G networks, is further regulated in the Law on Electronic Communications. The Law on Electronic Communications (Lag (2003:389) om elektronisk kommunikation (LEK)) was replaced by a new Law on Electronic Communications in 2022 (Lag (2022:482) om elektronisk kommunikation (NLEK)) while the Huawei case was pending. The Administrative Court of Appeals in Stockholm found, however, that there were no material changes in the new law that would affect the outcome of the Huawei case and that the case could therefore be tried against the provisions in the NLEK. Both the LEK and NLEK allow for special rules with reference to national security risks, providing specifically that “[p]ermits may be issued, if … it can be presumed that the radio use will not cause harm to Sweden’s security.” (3 kap. 6 §1 st 7 LEK & NEK.) Conversely, permits may not be issued if they may cause harm to Sweden’s security.
The Administrative Court of Appeals’s Decision on the Rules of the 5G Bid
The court looked at several issues pertaining to the 5G bid rules to determine if the restrictive rules were permissible, including:
- Should the PTS have communicated directly with Huawei?
- Did the PTS fulfill its duty to investigate the risks associated with Huawei?
- Did the PTS abide by the principles of objectivity and neutrality as well as the requirement that the agency act independently?
- Are there deficiencies in the wording of the PTS decision, and did the PTS make a decision that exceeded its authority?
- Is there a duty of notification under European Union (EU) law or World Trade Organization law?
- Are security risks limited by technical solutions or by other measures?
- Is the prohibition too extensive or otherwise disproportionate?
- Is the prohibition discriminatory?
First, the court found that the PTS did not have a duty to communicate with Huawei about its decision under administrative law. (25 § Förvaltningslagen.) It also noted that the decision, although made at the recommendation of the Swedish Security Police and the Swedish Armed Forces, was made independently and with sufficient evaluation of the risks involved. (Decision at 16.) The court then determined with regard to each issue that the PTS had not violated Swedish, EU, or international law when it prohibited Huawei from participating in the bid because the bid rules were necessary and proportional and could not be achieved by lesser means. Swedish procurement law provides that when there is a risk to Sweden’s national security, the procurement may discriminate among participants provided that the measure is proportional and the goal cannot be achieved by lesser means. (1 kap. 2 § LEK; 5 § Förvaltningslagen; Charter of Fundamental Rights of the European Union art. 52.)
In particular, the court noted that the decision to ban Huawei is based on a
real, current and sufficiently serious threat against the national security of Sweden. The investigation [by the authority] shows that China already today conducts spying and other security-threatening activities against Sweden, among others, and that the Chinese state could use Huawei to carry out such safety-threatening activities. Cyberattacks also now already occur and a threat against central parts of Sweden’s infrastructure must be considered such a serious threat that the restrictions in this case are permissible. It can therefore be assumed that products from Huawei in the 5G network may cause harm to Sweden’s security. (Decision at 33.)
In addition, regarding the bid’s special rules relating to staff employed abroad, the court found that these rules applied only to vendors that were granted a permit, and because Huawei was not granted one, the issue could not be heard in this case as it did not concern Huawei. (Decision at 44.)
The court specifically noted that the PTS was not bound by the EU report EU Coordinated Risk Assessment of the Cybersecurity of 5G Networks or the EU Toolbox for 5G Security and that other EU countries making different evaluations with regard to Huawei did not make the PTS decision illegal or disproportionate. (Decision at 41.)
Recognizing the security threat that Huawei poses, the Administrative Court of Appeals in Stockholm upheld the PTS rules for its 5G bid, and the outcome of the 2021 5G procurement bid therefore stands.
The decision by the Administrative Court of Appeals in Stockholm is final and cannot be appealed. (15 kap. 1 § NLEK.)