High Court overturns decision to drop BAE-Saudi arms deal inquiry

THE decision to drop a criminal investigation into an alleged £1 billion of backhanders paid by the UK's biggest arms company to Saudi Arabia was ruled illegal at the High Court yesterday.

Two judges said the Serious Fraud Office (SFO) decision to call off the probe on national security grounds amounted to surrendering to a foreign nation and made a mockery of British justice.

The decision was made in 2006 after Tony Blair, the then prime minister, warned that pursuing the case put the UK at risk of a terrorist atrocity similar to the 7 July bombings in London in 2005. And he claimed there would be more attacks on British troops in Iraq unless the SFO dropped its inquiry into a deal BAE Systems struck with Saudi Arabia in the 1980s.

There was grave concern within government that "British lives on British streets were at risk" if diplomatic relations broke down with the Saudis.

But Lord Justice Moses and Mr Justice Sullivan said Robert Wardle, director of the SFO, had failed to ensure everything had been done to resist the "threat" from Saudi Arabia to withdraw co-operation and scrap a new £20 billion order with BAE for Typhoon fighter jets.

In halting the investigation, the judges said Mr Wardle had "surrendered to a threat made with the specific intention of achieving surrender".

In a 42-page judgment, they said: "No-one, whether within this country or outside, is entitled to interfere with the course of our justice."

They said the decision to abandon the case, which focused on a £43 billion al-Yamamah contract BAE secured in 1985 to supply Tornado and Hawk jets and other military equipment, would create a "powerful temptation" for similar threats to be made against the UK again.

"We fear for the reputation of the administration of justice if it can be perverted by a threat," they said.

"So bleak a picture of the impotence of the law invites at least dismay, if not outrage."

The judges' decision places huge pressure on the SFO to reopen the case. It refused to comment in detail yesterday, but an appeal to the House of Lords is expected within a fortnight.

The SFO began investigating allegations of bribery in 2004 but ended the probe in December 2006 after a "specific threat" was made by "Saudi representatives" to Jonathan Powell, Mr Blair's chief of staff, the court ruling said.

The SFO was about to gain access to Swiss bank accounts, but Mr Powell was told the order for the Typhoon jets would be given to France and the close diplomatic relationship and sharing of counter-terrorism intelligence with the Saudis would cease.

Last night, Nick Clegg, the Liberal Democrats' leader, called for a public inquiry and said the decision not to prosecute had made Britain look "like a banana republic". Meanwhile, the Tories said the ruling was "extremely troubling" and added that Saudi Arabia had an obligation to help fight terrorism.

Susan Hawley, one of the campaigners who forced the judicial review, hailed the decision as "a great day for British justice".

Symon Hill, of the Campaign Against Arms Trade, said: "It has been clear from the start that dropping the investigation was about neither national security nor jobs. It was due to the influence of BAE and Saudi princes over the UK government."


Q & A: BAE CASE

Why was the court case brought?

Campaigners believed the Serious Fraud Office broke the law when it decided in 2006 to abandon its probe into allegations of corruption in a £43 billion arms deal between BAE Systems and the Saudi government in 1985.

What is BAE's position?

It denied offering bribes, saying the payments of £1 billion were above board. But the court ruling makes clear it tried to stop the SFO investigation in 2005 by claiming it would "adversely and seriously" affect relations between the UK and Saudi government and collapse a new deal to provide Typhoon planes to the Saudis.

What is Corner House?

It is a non-profit-making organisation which campaigns on overseas corruption and the role of the UK in fighting bribery.

What happens next?

An appeal to the House of Lords is expected to be announced in the next fortnight. Following yesterday's judgment, the Serious Fraud Office said it was "seriously considering" the implication

How much pressure does this place on the government?

Gordon Brown, the Prime Minister, is facing demands from the Liberal Democrats to call a public inquiry and for a shake-up in the role of the Attorney General to remove him from the conflict of interest in being the country's most senior law officer and a member of the Cabinet.