Page last updated at 21:13 GMT, Friday, 15 February 2008

Judges to rule on BAE challenge

The inquiry was opened in 2004 and dropped in 2006 amid controversy

Judges hearing a legal challenge to the decision to drop a corruption inquiry into an arms deal between BAE and Saudi Arabia have reserved judgement.

After the two-day hearing, the two judges said they would come to a conclusion as "soon as possible" on the case but gave no exact date.

The Serious Fraud Office says the probe was halted for security reasons.

But anti-corruption groups, who brought the case, say commercial interests caused the inquiry to be dropped.

Corner House and Campaign Against Arms Trade (CAAT) want the decision to quash the investigation to be overturned.

If this caused another 7/7 how could we say that our investigation...was more important?
Helen Garlick, assistant director at the Serious Fraud Office

The Serious Fraud Office (SFO) believed nothing could be done to resist threats from Saudi Arabia that it would withdraw cooperation in the fight against terrorism if the inquiry was not dropped, the High Court heard earlier.

However, a lawyer for the two anti-corruption groups maintained there is no evidence to prove this and have argued that the decision had been influenced by hopes of winning new contracts.

'Imminent threat'

The SFO lawyer Philip Sales was frequently interrupted by one of the judges with questions about the stance taken by the SFO and the British government in the face of an alleged "serious and imminent" threat to national security.

Lord Justice Moses said it appeared that Britain had simply "rolled over" instead of trying to make the Saudi government withdraw the threats, which amounted to criminal offences under British law.

Symon Hill (left) of CAAT and Nicholas Hildyard, director of Corner House
CAAT and Corner House challenged the SFO decision to drop the probe

But Mr Sales hit back: "We in the UK can't compel the Saudi Arabian government to adopt a different stance."

Documents released to the court showed the government thought "British lives on British streets" would have been at risk if the inquiry into alleged bribery had not been dropped.

In the documents, Helen Garlick, assistant director at the Serious Fraud Office stated:

"If this caused another 7/7 how could we say that our investigation, which at this stage might or might not result in a successful prosecution, was more important?"

Slush fund

The Serious Fraud Office (SFO), which began its investigation in 2004, had been examining whether BAE gave money to Saudi officials to help secure contracts in the 1980s.

The allegations centred on BAE's 43bn Al-Yamamah arms deal to Saudi Arabia in 1985, which provided Tornado and Hawk jets plus other military equipment.

BAE, the UK's largest defence group, was accused of operating a slush fund to help it secure the contract - but has always said it acted lawfully.

The SFO inquiry into the Al Yamamah deal was stopped in December 2006 by the government, with attorney general Lord Goldsmith announcing that it was threatening the UK's national security.

Corner House and CAAT are trying to prove in court that hopes of winning a huge new arms contract from Saudi Arabia influenced the officials who made the decision.

Commercial consequences

Documents released to the High Court showed that in 2005 BAE wrote letters to the Attorney General setting out the "reasons why the company considers it not to be in the public interest for the investigation to continue".

In one letter, BAE expressed concern that the disclosure of payments to agents and consultants involved in the deal would be seen by the Saudi Arabian government as a "serious breach of confidentiality by the company and the UK government".

It said this would "adversely and seriously" affect diplomatic relations between the UK and Saudi Arabian governments and "almost inevitably prevent the UK securing its largest export contract in the last decade".

Nicholas Hildyard, director of Corner House, said that the documents made it clear that national security, "the reason ultimately given for pulling the plug on this investigation", was used as a last resort.

"It was trotted out as a concern only when all these other special pleadings of commercial and diplomatic consequences had failed," he said.

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