UK: Mission impossible for legal top gun?

Mike Turner, chief executive of BAE Systems, had hoped yesterday might prove to be a turning point in his attempts to restore confidence in Britain's biggest defence company, which has spent much of the past six months doggedly battling accusations of corruption.

While the BBC was last night due finally to broadcast the Panorama programme that it had been trailing for the previous 10 days, Mr Turner knew the documentary would include no new revelations about BAE's involvement in secret payments to the Saudi Arabian royal family.

Meanwhile, he had been expecting to spend the day putting the final touches to his plan for the launch of an independent business ethics committee at BAE, to be chaired by Lord Woolf, the former Lord Chief Justice of England and Wales.

Unfortunately, BAE's plans for the committee were leaked to journalists ahead of schedule, and campaigners poured scorn on the idea that the initiative would help the company put the corruption allegations behind it.

Publicly, BAE yesterday refused to comment on reports that it has hired Lord Woolf, or even that it has been discussing the launch of an ethics committee. Privately, however, officials at the company concede they are close to signing up Lord Woolf to chair a committee of well-known figures who would advise the company on its business standards and policies. The idea was first proposed by executive directors, led by Mr Turner, earlier this year, and the company has been working on the detail for several months.

The committee seems unlikely to appease BAE's harshest critics. Analysts made comparisons yesterday with an independent review of health and safety set up last year by the oil company BP, following an explosion at one of its refineries in Texas City. But crucially, unlike the BP inquiry, BAE's committee will have no remit to investigate what has gone on at the company in the past. Lord Woolf will not be employed to study the Al Yamamah arms deal BAE signed in the 1980s, or any of the allegations about payments that the company has subsequently made to the Saudi royal family.

A spokesman for the Campaign Against Arms Trade, which is seeking a judicial review of last December's decision by the Serious Fraud Office to drop its investigation into such payments, said the launch of the committee would not be enough for BAE to move on from the Al Yamamah affair. "This announcement is certainly no substitute for a proper SFO investigation," he said. "This will not address the previous allegations at all."

Panorama last night repeated allegations the corporation first made last week. It said BAE had paid up to £120m a year into accounts controlled by Prince Bandar, a leading member of the Saudi royal family, as part of the original Al Yamamah arms deal negotiated between the UK and Saudi Arabian governments in 1985.

Prince Bandar has already vehemently denied any improper or illegal actions. The Ministry of Defence has said it was unable to comment on the affair, because it had signed a series of confidentiality agreements as part of the original Al Yamamah contract. BAE has cited the same agreements, though it too insists it has not behaved illegally.

However, while the Al Yamamah confidentiality clauses present investigators with a challenge, they have also left BAE facing a dilemma. The company concedes payments were made under the contract, but it is unable to explain exactly what they were for - or reveal how much was paid, when, who to and how.

Legal experts said yesterday that none of the parties to the original Al Yamamah deal have yet offered sufficient explanations for their actions for independent observers to be confident there have been no breaches of the law. It also emerged yesterday that there has been a significant difference of opinion between the SFO and the Government over the shelving of the BAE investigation last year.

In December, Lord Goldsmith, the Attorney General, told the House of Lords that the inquiry had been dropped for two reasons. First, he said: "I consider, having carefully considered the present evidence, that there are obstacles to a successful prosecution so that it is likely that it would not in the end go ahead." In addition, Lord Goldsmith said the inquiry had been dropped following concerns about UK and Saudi national security and intelligence issues.

Yesterday, however, the SFO's director, Robert Wardle, insisted that he had taken the decision to drop the inquiry purely on the basis of the national security concerns. A spokesman for the SFO said the investigating team had, in December, not come to a view on whether prosecutions would ultimately have been possible. "We would like to have seen the investigation proceed to an evidential outcome," he said.

The basic legal question facing investigators into the Al Yamamah deal is deceptively straightforward. It is whether payments made to Prince Bandar, or any other Saudi officials, contravened the Anti-terrorism, Crime and Security Act, which came into force in the UK in March 2002.

The act, which was passed in November 2001, four years after the UK signed up to an OECD convention on international business corruption, made it a criminal offence for a British company to offer public officials in foreign countries any inducements designed to win business. While it had previously been illegal to offer bribes of this sort in the UK, there had been no statute to stop British companies bribing officials overseas.

Any prosecutor who wanted to bring a case against BAE today would therefore have to produce evidence showing that the payments made to Prince Bandar were not for legitimate services but designed specifically to win arms contracts from Saudi Arabia. In addition, a prosecutor would have to prove these payments continued after March 2002, when the British law came into force.

Jeremy Carver, a lawyer specialising in international corruption issues, said BAE could not rely on the fact that payments were written into legal contracts between the UK and Saudi Arabia. "Most long-term commissions of this sort are written into contracts, but the issue is what these commissions are actually paid for," Mr Carver said. "Every time you pay an overseas official, you must first stop and ask the question, 'is this legal and proper?'"

Mr Carver said that if BAE accepted it had made payments to Prince Bandar after March 2002, it would have to be able to show the money had been handed over for "significant and important" purposes. "It seems to me to be very difficult, particularly given the peculiar way in which some of these payments are alleged to have been made," he added.

Nick Wray, a spokesman for the OECD, said the organisation also continued to be concerned. "The case is symptomatic of the UK's less-than-adequate implementation of the convention on corruption," he said.
In March, the OECD said it still wasn't satisfied with the way in which British law reflected the original anti-corruption treaty. Officials are now working on a review of the UK's approach to the convention, including "whether systemic problems explain the lack of foreign bribery cases brought to prosecution [in the UK]."

AMP Section Name:War & Disaster Profiteering
  • 185 Corruption

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