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Last Updated: Sunday, 29 April 2007, 12:47 GMT 13:47 UK
Dropping Saudi probe 'harmed UK'
Eurofighter jet
Critics said the corruption probe threatened a major Eurofighter deal
Britain's reputation for fighting corruption may have suffered "severe damage" because a fraud inquiry into an arms deal was dropped, MPs have warned.

The Serious Fraud Office's inquiry into a 1980s deal between BAE Systems and Saudi Arabia was stopped last December.

Tony Blair has said the decision was made in Britain's national interest.

The Commons foreign affairs committee has now urged ministers to explain how they responded to criticism from the international anti-bribery watchdog.

The Attorney General, Lord Goldsmith, said the UK had a good record on combating international corruption.

In December, the prime minister said he took full responsibility for the decision to drop the probe and that the move was in the national interest because of Britain's relationship with Saudi Arabia.

I told the Serious Fraud Office that they must pursue the other BAE cases vigorously, and they're doing that
Lord Goldsmith

But the decision was condemned by the anti-bribery watchdog, the Organisation for Economic Co-operation and Development (OECD), which is planning to send inspectors to Britain to find out why the SFO investigation was stopped.

In its latest report on human rights, the commons foreign affairs committee called on ministers to explain how they have responded to criticism from the OECD.

It also said the decision to abandon the long-running investigation into the al Yamamah deal may have damaged Britain's reputation.

The SFO was investigating claims that Britain's biggest defence firm BAE had paid bribes to secure an arms deal with Saudi Arabia in the 1980s. BAE has always denied the claims.

The committee of MPs said: "We conclude that the government's decision to halt the inquiry into the al Yamamah arms deal may have caused severe damage to the reputation of the United Kingdom in the fight against corruption."

'Human rights'

It also said the decision may have undermined Britain's ability to tackle the Saudi government.

"There may also be an argument that it has weakened the United Kingdom's ability to take firm action against Saudi Arabia in a range of fields, including human rights," it said.

The MPs called on the government to "set out what steps it had taken" since the decision was made last December to "maintain momentum on international anti-corruption measures".

Lord Goldsmith said the SFO were still carrying out investigations.

"I told the Serious Fraud Office that they must pursue the other BAE cases vigorously, and they're doing that," he told BBC Radio 4's The World This Weekend.

"They're actively investigating cases in relation to five different countries."

The SFO inquiry, which was examining relations between the Saudis and BAE Systems, was stopped after consultations between Mr Blair and the Attorney General Lord Goldsmith.

It came weeks after reports that the Saudis were threatening to pull out of a deal to buy 72 Eurofighter jets from BAE and deal with France instead.

But the government denied the inquiry was dropped after commercial and political pressure.

Last week it emerged that the US made a formal diplomatic protest about the closing down of the inquiry.

Iraq 'abuses'

The Commons foreign affairs committee also expressed concern about human rights abuses in Iraq and Afghanistan.

"There has been a further grave deterioration in respect for human rights in Iraq, in large part caused by the worsening security situation," it said.

The MPs said they were concerned over allegations some Iraqi minister and ministries were involved in human rights abuses and in a "sharp rise" in the number of executions and claims of unfair trials, "including the trial and execution of Saddam Hussein," it said.

In Afghanistan there had been a "lack of progress" in achieving basic human rights in large sections of society, the report said.

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