A group of shareholders has initiated legal action against Ericsson, alleging the company failed to disclose material information from an internal investigation into its business activities in Iraq.
The claimants are seeking damages estimated between $175 million and $300 million, asserting that the delayed disclosure led to substantial financial losses for shareholders. As of 4 August 2023, 37 claimants have filed suit against Ericsson, and additional plaintiffs are expected to join the case.
The controversy surfaced in February 2022 after portions of the internal investigation report were leaked to the International Consortium of Investigative Journalists (ICIJ). The leak compelled Ericsson to acknowledge the investigation and release limited details about its findings.
Following that admission, Ericsson’s share price dropped sharply—about 25 percent. The company’s internal report had reportedly been completed more than two years earlier, raising questions about the timing and transparency of the disclosure.
Central to the lawsuit are the European Union’s Market Abuse Regulations (MAR), which require issuers to disclose inside information that could affect investors promptly and openly. Article 17.1 of MAR obliges companies to make such information readily accessible so the market can perform a full and accurate assessment when appropriate.
The shareholders’ claim contends that Ericsson breached MAR by withholding significant details of its internal probe into Iraq for an extended period, thereby preventing investors from making informed decisions.
According to published reports about the leaked material, the internal investigation allegedly uncovered serious compliance failures. Those reports claim the findings included instances of corruption, tax offenses, and payments that may have benefited the terrorist organisation IS in Iraq. The leaked excerpts also suggested the use of alternative transport routes through IS-controlled areas to avoid Iraqi customs duties and alleged payments that could be construed as bribes—conduct that, if proven, would violate local and international law.
Ericsson carried out a thorough internal inquiry that produced a detailed 79-page report. The company, however, elected not to publish the report or fully disclose its contents to the market, a decision that is now at the heart of the legal dispute.
This Swedish shareholder lawsuit is distinct from previous enforcement actions in the United States. On 6 December 2019 Ericsson entered into a Deferred Prosecution Agreement (DPA) with the U.S. Department of Justice relating to violations of the U.S. Foreign Corrupt Practices Act (FCPA) across several years, resulting in a penalty of roughly SEK 10.1 billion (about $954 million at the time).
On 2 March 2022 Ericsson disclosed that the DOJ concluded the company had failed to meet certain DPA obligations, specifically for not providing sufficient information about the internal investigation. Ericsson subsequently reached an additional settlement with the DOJ that included an extra fine of about $200 million. The U.S. settlement, however, did not resolve all matters connected to the company’s activities in Iraq, which remain under separate inquiry by U.S. authorities.
The combined effect of these developments has weighed on Ericsson’s reputation and raised concerns among investors about governance and compliance practices. Shareholders pursuing the Swedish action are seeking accountability and compensation for the alleged losses tied to the company’s delayed disclosure.
As the legal proceedings continue, Ericsson’s conduct, corporate governance and financial position are likely to face closer scrutiny from regulators, investors and the public. Shareholders and market observers will be monitoring the outcome carefully, given the potential implications for the company and precedents for disclosure obligations under MAR.
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