British American Tobacco p.l.c. is confronting a new legal challenge in the United Kingdom, as a group of more than 100 current and former shareholders has filed a lawsuit at the London High Court. The claimants allege the global tobacco giant failed to adequately inform investors about breaches of U.S. sanctions connected to its historical business activities in North Korea.
Legal Action Follows Major U.S. Settlement
The shareholder claim, lodged on February 27, 2026, stems directly from BAT's 2023 resolution with U.S. authorities. In that settlement, the company agreed to pay $635.2 million to resolve three separate cases, including a guilty plea from a subsidiary related to tobacco shipments to North Korea and associated bank fraud occurring between 2007 and 2017. The U.S. Department of Justice characterized the penalty as the largest ever imposed for violations of North Korea sanctions.
Legal representatives for one claimant group, Fox Williams, contend that BAT did not disclose critical details about its North Korea ties from 2007 through 2023. In response to the lawsuit, BAT acknowledged the legal action but stated that a prior agreement with U.S. officials restricts it from discussing the relevant documents or facts of the case. The financial value of the latest shareholder claim has not been publicly disclosed, and court filings reveal a separate suit was filed against the company on the same day.
Strategic Pivot Under Scrutiny
This legal development arrives at a pivotal moment for BAT as it seeks to demonstrate the success of its strategic shift away from traditional cigarettes. The company, known for brands like Lucky Strike, recently reported that smokeless products—including Vuse vapor products, Velo nicotine pouches, and heated tobacco devices—accounted for 18.2% of its total group revenue in 2025. On an adjusted basis, earnings per share grew by 3.4% for the full year.
Chief Executive Tadeu Marroco has pointed to "encouraging" momentum for the Vuse brand. According to the company, Velo has secured the number two market share position for nicotine pouches in the United States, trailing only Philip Morris International's Zyn and gradually taking market share from Altria's On! product. Analyst Andrei Andon-Ionita from Jefferies noted that BAT appears "well-positioned" to continue gaining ground in the competitive U.S. pouches segment.
Financial Guidance and Market Headwinds
Despite the legal overhang, BAT reiterated its 2026 financial guidance last month. The company is targeting sales growth of 3% to 5%, operating profit growth of 4% to 6%, and earnings per share growth of 5% to 8%, with expectations set at the low end of each range. The firm continues to invest in new nicotine offerings and productivity initiatives.
However, management has flagged several challenges. Interim Chief Financial Officer Javed Iqbal warned in February that the Australian market would remain "a meaningful drag" on performance in 2026. For the critical U.S. market, BAT anticipates Vuse volumes will remain flat, citing slow progress as regulators intensify a crackdown on illegal vaping products. The company is proceeding with a £1.3 billion share buyback program and aims to bring its debt within a target range by the end of 2026.
Prolonged litigation could lead to increased legal costs and management distraction, complicating BAT's efforts to launch new products such as Vuse Ultra, glo Hilo, and Velo Shift. This comes as rival Philip Morris International projects double-digit adjusted earnings growth for 2026, setting a contrasting tone in the tobacco sector. Investors are now closely watching how both companies will execute their strategies amid evolving regulatory and legal landscapes.
