U.K.-Saudi arms deal gets renewed scrutiny

The British High Court on Friday ordered a full judicial review of the government's decision to stop an investigation into alleged corruption by BAE Systems in an arms deal with Saudi Arabia.

The court agreed to hear a challenge on the decision to stop the inquiry, which was made in December 2006. The Serious Fraud Office called off a two-year investigation into what is possibly the biggest export transaction in British history, a weapons deal between the British and Saudi governments with a value estimated at £40 billion, or more than $80 billion. The investigation focused on BAE, which served as prime contractor and supplied Saudi Arabia with fighter jets.

Two groups, Corner House Research and the Campaign Against Arms Trade, made the plea for the review. Corner House said the review was likely to last two days and be held in the winter.

Tony Blair, prime minister when the inquiry was dropped, was criticized by political opponents after saying that Britain's national interests would be damaged if the Serious Fraud Office proceeded with its investigation. They said the decision went against the rule of law and accused the government of ceding to pressure from the Saudi royal family.

The British government denied taking into account any commercial considerations in the decision. Such influence would violate rules of the Organization for Economic Cooperation and Development, of which Britain is a member.

The two interest groups argue that Britain violated the rules. The OECD itself expressed "serious concerns" about the termination of the investigation. The U.S. Justice Department is conducting an inquiry into BAE.

The British government signed a secondary deal for BAE to supply Saudi Arabia with Eurofighter jets in September, at a price of £4.4 billion.

Lord Justice Alan Moses said the case concerned "a question of great public importance" and "cries out for a hearing."

BAE made it clear it was not a party to the court hearing Friday. Scott Hailstone, the company's spokesman in London, said, "Any questions should be directed to those parties." BAE has denied making improper payments in connection to its dealings with Saudi Arabia.

The High Court will examine the decision-making process used by the Serious Fraud Office. The court could then order the office to reconsider the decision. But the office would be allowed to draw the same conclusion if all procedures were correctly followed.

"I don't think this is going to change the outcome of the original decision, but it will be an irritant for BAE Systems to have the issues aired once again," Howard Wheeldon, an analyst at BGC Partners in London, was quoted as saying by Bloomberg News.

Dinah Rose, a lawyer for the two interest groups, told the court that the investigation was called off shortly after the Serious Fraud Office obtained search orders for Swiss bank accounts. "That was the point at which the acute pressure seems to have been applied," she said.

Philip Sales, a lawyer for the government, said that Robert Wardle, director of the Serious Fraud Office, had made the decision based on the evidence provided by the government and that he would make the same decision again.

"The material that he was given to consider was so pressing in regard to national security that he would have taken the same decision no matter what the OECD convention," Sales said.

Terms of Use