This site was set up to detail the judicial review of the decision to end the SFO investigation into BAE-Saudi arms deals.
Now the judicial review has finished, the site will be left online for the record. It is frozen as of February 2009.
1. Bringing the Judicial Review
Dec2006 - Nov2007
2. Judicial Review hearing
3. Changing the law
4. Judicial Review ruling
5. SFO appeal to House of Lords
6. They think it's all over; it isn't now...
Oct 2008 -
16 October 2008: OECD criticism
To BAE or not to BAE?
- 13th International Anti-Corruption Conference, Athens
- UK Anti-corruption Summit (3-4 February 2009)
Other investigations into BAE continue
4 February 2009: Licence to claim blackmail
If the UK government or BAE thought that the House of Lords judgment meant the end of the affair, they could not have been more wrong. The judicial review and all the issues and campaigns associated with it have had a huge impact on public perceptions not only of corruption and arms sales but also of political accountability and political realities. Undoubtedly CAAT and The Corner House were disappointed, but do not feel defeated. The Lords’ judgment does not seem to have repaired BAE’s reputation; invariably when the company is mentioned in the media, it is accompanied by a sentence mentioning corruption allegations. Legal scholar Professor John R. Spencer opened his comments on the case with the words: "The 'Al Yamamah affair' (as the press call it) was unsavoury; if drawn by Plantu for Le Monde, more than one of the main players would be accompanied by flies." In future, it will be much harder for the UK government to intervene on behalf of BAE Systems or other high profile companies – or at least to do so so blatantly because the extent to which arms companies have an influence within and over government is now public knowledge. Awareness of bribery and corruption has also increased and of the UK’s international obligations.
In October 2008, the OECD’s Working Group on Bribery published a scathing report on the UK, affirming that it was "disappointed and seriously concerned with the unsatisfactory implementation of the [OECD Anti-bribery] Convention by the UK."
The OECD had expressed "serious concerns" back in January 2007 over the SFO’s decision to terminate its BAE-Saudi investigation. On 14 March 2007, its Working Group on Bribery reaffirmed these "serious concerns" (and highlighted further concerns about the inadequacy of the UK’s foreign bribery and corporate liability legislation, and its systems for investigating and prosecuting foreign bribery). It announced that it would carry out an in-depth review of the UK’s implementation of the Convention focusing on:
The OECD's Working Group on Bribery comprises public servants from the 37 signatories to the Convention. It monitors parties' performance in implementing the Convention through a peer review process to which parties agree when they sign and ratify the Convention. The monitoring process usually comprises just two stages: Phase 1 assesses legislation and Phase 2 examines overall implementation. In rare cases when countries fail to meet their commitments, a follow-up evaluation of key weaknesses, Phase 2bis, is carried out. It was this last evaluation that the Working Group announced for the UK in March 2007.
The December 1999 Phase 1 review had expressed
serious concerns over the UK’s foreign bribery legislation and urged the UK to "enact appropriate legislation . . . as a matter of priority". A Phase 1bis review in October 2002 recommended that the UK "proceed at the earliest opportunity to enact a comprehensive anti-corruption statute" to address several outstanding concerns. (As the October 2008 report noted, "this recommendation has not been implemented in the six years since it was made".)
The Phase 2 report on the UK’s implementation of the Convention, released on 17 March 2005, highlighted the following weaknesses:
The March 2005 report had made several recommendations aimed at enhancing the UK’s capacity to deter, detect and sanction foreign bribery offences. Two of these recommendations were to focus on:
"the performance of the SFO and other relevant agencies with regard to foreign bribery allegations . . . including in particular with regard to decisions not to open or to discontinue an investigation."
"[taking measures to] ensure that the investigation and prosecution of bribery of foreign public officials shall not be influenced by considerations of national economic interest, the potential effect upon relations with another state or the identity of the natural or legal persons involved [Article 5]."
All these reports indicate that the UK was failing in its international obligations even before December 2006 when the BAE-Saudi investigation was stopped and even before the July 2008 Lords judgment, which made clear that it is in flagrant breach of such obligations.
The October 2008 Phase 2bis report concluded that "there is a lack of political will [in the UK] to achieve compliance with the Convention". It stressed that "failing to enact effective and comprehensive legislation undermines the credibility of the UK legal framework and potentially triggers the need for increased due diligence over UK companies by their commercial partners or Multilateral Development Banks."
The Working Group investigated the BAE-Saudi case because it raised "important issues relating to investigation and prosecution [and] defects in the foreign bribery offence in the UK." It found that the UK authorities had breached their obligations under the Convention’s Article 5 when they cancelled the SFO’s BAE-Saudi investigation because of "the very limited evidence of contemporaneous government consideration of options other than stopping the investigation."
". . . the UK government did not engage in sufficient efforts to develop and explore alternatives to terminating the Al Yamamah investigation. They [the OECD’s Working Group on Bribery] recommend that, in situations where dropping a foreign bribery case other than on the merits is being considered or recommended, the UK government thoroughly explore alternative solutions as appropriate."
The Working Group stressed that Article 5 encompasses "the role of the broader government in searching for alternatives to dropping case", not solely that of the investigator or prosecutor. "In this case, lack of government action to explore other actions in response to threats is not explained by limits on the action of a prosecutor."
The Working Group concluded that the UK Government had breached Article 5 even if the Convention had a national security exemption, which it stressed it did not. "Article 5 does not leave any room for discretion with regard to its prohibited considerations."
"[A]ssuming solely for purposes of analysis that national security could constitute an exception under Article 5 as the UK suggests, the Al Yamamah case would then conceivably present a situation in which a prosecutor was being advised to drop a major case based on both Article 5 and non-Article 5 factors [economic considerations and national security]. In such cases, the lead examiners [of the Working Group on Bribery] consider that prosecutors must subject the non-Article 5 factors to strict scrutiny in order to dispel doubts that the Article 5 factors are in fact influencing the decision. The strength of the Article 5 interests and arguments will be a factor in reviewing how prosecutors have acted with regard to the case: generally the stronger the interests and arguments relating to Article 5 factors, the more intensively prosecutors should review proffered non-Article 5 justifications for dropping a case."
The House of Lords was swayed by the SFO Director’s assertion that he would have taken the same decision to discontinue the BAE-Saudi investigation even if he had thought that it was contrary to Article 5. But as the Working Group pointed out:
"The same argument could be made if the Director considered Article 5, but decided that in his/her view the national economic interest nonetheless prevailed. The UK government has not explained how such action would be consistent with the Attorney General’s commitment to the Working Group that Article 5 will apply."
The Working Group underlined "the need for the provision [Article 5] to be clearly binding in the UK domestic sphere (although not necessarily through legislation). Given . . . the commitment by the Attorney General to the Working Group . . . introducing Article 5 as a limit on prosecutorial discretion should not be difficult." It recommended "that the UK take all necessary measures to ensure that Article 5 applies to all investigation and prosecution decisions in foreign bribery cases."
The report noted the "effect on the whole process" of the commercial considerations repeatedly mentioned by then Prime Minister Tony Blair.
It found that the SFO’s Director, Robert Wardle, had been given insufficient access to security advice before he declared the investigation dropped on grounds of "national security". Instead, he was left to consult the UK’s Ambassador to Saudi Arabia, a process the Working Group described as "unclear" – "why he was the sole expert consulted first hand by the SFO" – given that the SFO itself had identified "the security services as a 'better' source of information."
The OECD report also noted that the original BAE submission to the SFO on the public interest (see above) had highlighted the apparent role of the UK Ambassador in the commercial negotiations with the Saudi government concerning the government-to-government Typhoon contract. "[S]uch direct involvement in negotiating an immensely important export contract could give rise to concerns about unconscious bias or perceptions of partiality, and should have led to broader consultations."
At the Working Group’s on-site visit to the UK as part of its Phase 2bis review process, "the [SFO] Director indicated that he was not in charge of the fact-finding process relating to the public interest." Moreover, the SFO initially contacted the Ambassador only to discuss the merits of the case; it was the Ambassador, however, who made representations on national security.
"The lead [OECD] examiners are . . . not convinced that the prosecutorial authorities sufficiently scrutinised the national security justifications with regard to the Al Yamamah case. Among other things, those authorities should have questioned more intensively whether the alternatives to terminating the case had been considered and tried, and should have sought other views beyond those of the Ambassador and especially from the security services."
(It is known that the UK's Secret Intelligence Service (SIS) was not the author of the assessment of the risks posed by the Saudi threats upon which the SFO Director based his decision. The SFO Director stated in his witness statement that he never saw any of the national security assessments. Documents released during the judicial review proceedings clearly indicate that national security concerns were raised only after the SFO had turned down commercial and diplomatic arguments for stopping the investigation into the BAE-Saudi arms deals.)
If it were not for the judicial review, none of this information would have come out: "a number of key documents relating to the discontinuance did not become public for almost a year and did so only in the context of the judicial review proceeding", stressed the OECD. Echoing the words of Lord Justice Moses in the High Court, the OECD Working Group pointed out that:
"There is no guarantee of publicity for decisions in the UK to shut down viable investigations based on the public interest (or not to open investigations for the same reason). No statistics are kept. The existence of allegations not investigated for public interest reasons may never become known to the public . . .
"There is also no general requirement for any written recording of the public interest reasons for termination of the investigation. The only written recording of reasons by the Director of the SFO in the Al Yamamah case is in the very short SFO press release . . .
"Those who issue threats to obtain the discontinuance of legal proceedings may well also seek to ensure that there is little or no publicity given to the matter. In these cases, the public interest decision may never come to light particularly since certain national authorities may also not have any strong incentive to disclose the matter. This did not occur in the Al Yamamah case because of some special conditions. The investigation was public knowledge and the company’s shares were publicly traded, so the information was market-sensitive and needed to be promptly disclosed. Intense parliamentary, media and international interest resulted in numerous relatively contemporaneous public explanations of the discontinuance by the principal parties."
Commenting on whether provisions concerning disclosure to Parliament are a sufficient safeguard, the Working Group noted that "despite intense parliamentary interest, much of the disclosure of the concrete circumstances of the Al Yamamah termination occurred only in the context of the judicial review in which key contemporaneous documents were made available by government."
On the draft Constitutional Renewal Bill (which would allow the Attorney General to cancel a foreign bribery investigation or prosecution on asserted national security grounds, see above), this OECD Phase 2bis report stated that the proposed legislation "could seriously weaken public accountability" and "would represent a serious backward step in this area." It pointed out that "terminating viable foreign bribery prosecutions should not be a normal tool for responding to national security threats and . . . judicial inquiry is if anything more justified in such cases than in other contexts."
The Working Group also highlighted that "national security issues may arise in a wide variety of contexts. In a wide-ranging constitutional renewal bill, it is therefore unclear why there should be a special rule for judicial review of prosecutions" – other than to make sure cases such as that brought by CAAT and The Corner House don’t happen again.
"The concern about weaker accountability is that it creates a risk of making discontinuances [of bribery investigations and/or prosecutions] more frequent. It may also encourage a broader reading of national security because the issue would not be subject to review under domestic law and not even be subject to disclosure. The system will encourage threats and provide a road map to discontinuance and non-disclosure."
This OECD report also contained a detailed analysis of the role of the government’s Export Credits Guarantee Department (ECGD) in supporting the Al Yamamah arms contracts. (The ECGD is a government body that uses public money to provide companies with insurance against the main commercial and political risks of operating abroad. For further information, see Turning a Blind Eye: Corruption and the UK Export Credits Guarantee Department.) One of the four branches of the (discontinued) SFO Al Yamamah investigation involved allegedly fraudulent misrepresentations made by BAE to ECGD in order to obtain insurance cover for the contracts. The Working Group on Bribery noted that the SFO had "supplied to ECGD the evidence of bribery-related fraud against it" – alleged misrepresentations by BAE to ECGD in connection with ECGD issuing insurance rather than alleged bribery in the contracts themselves that ECGD was insuring – and that the SFO indicated it was now up to the ECGD to determine what to do about it.
The ECGD "declined to provide [to the Working Group] the requested information about whether ECGD had taken any action with regard to the evidence of alleged fraud" on the grounds that this would breach commercial confidentiality. But as lawyers for CAAT and The Corner House subsequently wrote to the ECGD, "A duty of confidentiality only applies insofar as it is in the public interest for the confidentiality to be maintained. Nor can any duty of confidence be owed in respect of evidence of wrongdoing."
The ECGD does have anti-bribery provisions in its export credit documents and its procedures before granting insurance, provisions that the OECD described as being "of little use in deterring bribery if they appear to remain unused by the export credit agency in relevant cases." The OECD report concluded that it was "seriously concerned about the lack of evidence of any response by ECGD to the serious allegations of bribery-related fraud relating to the Al Yamamah contracts."
The OECD report also drew attention to the sale of 72 Typhoon jet fighters manufactured by BAE (the deal Prime Minister Tony Blair was keen should not be jeopardised by the SFO investigation). The sale was provisionally agreed between the UK and Saudi governments on 21 December 2005 and formally accepted in September 2007 as the $8 billion Al Salaam contract (after the SFO investigation was terminated). Queries arise as to whether the ECGD provided insurance for this deal after it was known that Saudi Arabia had sought to threaten the UK’s national security.
"Threats by foreign states that interfere with criminal law proceedings in foreign bribery cases raise numerous additional issues for ECGD . . . [The Working Group] recommend that ECGD take all necessary measures, including enhanced due diligence when appropriate, to ensure that applications for export credit support, or anyone acting on their behalf, have not engaged in, and will not engage in, foreign bribery or foreign-bribery-related fraud against ECGD. Such measures should address in particular the issues raised by cases where criminal proceedings may be blocked for reasons unrelated to the merits [of the cases]."
The Corner House and CAAT welcomed the OECD report as a vindication of their judicial review of the decision.
Following up the report, lawyers representing both groups wrote to the SFO and to the ECGD on 14 November 2008. The letter to the SFO raised questions about the SFO's response to the OECD's detailed and sustained criticisms of SFO failure to scrutinise properly the alleged national security justifications and its recommendations to keep the BAE-Saudi case under review. A reply is awaited.
The letter to the ECGD asked what steps the Department was taking concerning its cover for the Al Yamamah contracts in particular and Saudi Arabia in general. CAAT and The Corner House have long called for the ECGD not to use taxpayers' money to underwrite arms deals and to ensure that it does not underwrite bribery. BAE's arms deals with Saudi Arabia have been underwritten by the ECGD for more than two decades.
From the ensuing correspondence, it appeared that BAE had terminated its cover from ECGD for its Saudi Arabian contracts on 1 August 2008, with effect from 1 September 2008. These exports accounted for nearly half of ECGD's portfolio (as of 31 March 2008), with a total liability of £750 million.
It is certainly surprising that BAE terminated all its public insurance support having relied on it for at least 20 years. It is all the more surprising in the current financial climate given that many non-military companies have been turning to the ECGD for state support since private sector insurance cover for exports began to dry up from 2007 because of the "credit crunch".
BAE’s termination of public insurance for its controversial Saudi arms deals means that the ECGD is less open to potential legal action over its support for the Saudi deals.
The UK government has not yet responded officially to the OECD’s report, but it did publish a new UK Strategy on Tackling Foreign Bribery on 15 October 2008 – just two days before the OECD Working Group’s report. The Government had promised in December 2007 to bring a new anti-bribery bill before Parliament in 2008. On 18 December 2007, for instance, the Secretary of State for Business Enterprise and Regulatory Reform, John Hutton MP, whom the Prime Minister had appointed as "international anti-corruption champion", announced a UK Anti-Corruption Plan that included the 2008 date. But in its new UK Strategy announced in October 2008, the Government pushed the new legislation back to 2009 (see below) – a whole decade since the OECD Anti bribery Convention came into force, and well over a decade since the UK signed up to it.
Several high profile business anti-corruption conferences continue to highlight the judicial review and the UK’s failure to deal effectively with corruption.
The first IACC conference was held in 1983 to focus on law enforcement, but has since become a forum to exchange experience, ways and means of combating corruption attended by nearly 2,000 people from around the world. Given the high profile of the BAE case, the groups were invited to the 13th IACC conference to give a presentation on "Sustaining corruption investigations in a hostile political environment". We stressed the dedication of SFO staff in their work, and that "no more hostile environment exists for a prosecutor than the threat that continuing with an investigation might endanger lives." But we also pointed out that, "far from encouraging a political environment that encourages anti-corruption efforts, successive [UK] governments have actively tolerated (and even allowed to flourish) an environment that is hostile to such efforts."
"The generous interpretation of the UK’s failure to implement the OECD Anti-Bribery Convention is that it reflects, in the OECD’s own words, a 'lack of political will'. A more accurate view is that, far from lacking political will, the UK government has devoted immense political will over the years to the task of protecting a few powerful companies from prosecution for bribery. And the extent of such political will is reflected in the UK’s willingness to jeopardise, if not fatally sabotage, the OECD Anti-Bribery Convention itself."
Given the increasing use and abuse of national security arguments, and the proposal to enshrine the potential for such abuse, "the implications of the UK’s undermining of Article 5 of the OECD Anti-bribery Convention go far beyond corruption."
The promotional material for a UK Anti-corruption Summit (organised in February 2009 by ‘Ethical Corporation’, a business led initiative) on "how to mitigate corruption risk with effective compliance and ethics", included a heading: 'To BAE or not to BAE'. The conference promotional material described some of the issues:
"Perhaps the root cause of the UK’s problems started when the High Court gave a recent ruling stating that the Serious Fraud Office (SFO) . . . had acted unlawfully in discontinuing a major probe into allegations of bribes by BAE Systems to Saudi Officials . . .
"The judges said: 'We fear for the reputation of the administration of justice if it can be perverted by a threat . . . No one, whether within this country or outside, is entitled to interfere with the course of our justice. The rule of law is nothing if it fails to constrain overweening power.'
"Such comments reflect the state of the relationship between current UK bribery laws, the government and big business with international interest.
"Importantly, where the US Department of Justice (DoJ) wields the FCPA [Foreign and Corrupt Practices Act] to ensure that big corporate executives are made accountable for corruption, and European countries – most notably Germany and France in the high-profile Siemens and Alstom cases – begin to come down hard on bribery, the UK has yet to make a single charge stick.
"So does the BAE saga provide strong enough grounds for laws similar to the FCPA to be drawn up in the UK?"
Continuing this theme of mitigating corruption risk with ethics, the US legal magazine Corporate Counsel indicated that "the BAE case's impact may ultimately lie with the effect the scandal has on other companies."
"In London, the international law firm of Norton Rose Group has launched an anti-corruption and business ethics group in response to increased client demand for help in reducing exposure to anti-fraud laws, especially US laws.
"'The climate is changing here and will change quite fast, as it did in the US three to five years ago,’ says Sam Eastwood, the partner heading the new group. 'Three years ago, a law firm didn't dare approach a corporation and say, let's talk about corruption. It would be an embarrassment,' Eastwood says. But now the corporations are calling the lawyers to talk about it.'"
Besides the US corruption investigation into BAE’s arms sales with Saudi Arabia (see above), other countries are also carrying out investigations. Switzerland is conducting three criminal investigations into possible money laundering linked to BAE. In late 2008, meanwhile, Sweden opened an investigation of a 1999 BAE/Saab deal in which the consortium sold jet fighters and trainer jets to South Africa. The Swedish prosecutors (and the Serious Fraud Office, see below) are investigating some £116 million of bribes allegedly paid on this contract.
Meanwhile, the UK’s Serious Fraud Office continues to carry out six other investigations into BAE’s deals with Chile, Czech Republic, Qatar, Romania, South Africa and Tanzania.
Under current constitutional arrangements, the UK courts give wide discretion to the Government on decisions that invoke national security. For this reason, the evaluation of the national security threat upon which the Serious Fraud Office based its decision to stop its BAE-Saudi investigation was never considered in the judicial review hearings. But if the public is to be assured that criminal investigations and prosecutions are dropped only in the face of genuine national security threats, and if the rule of law is not to be compromised, CAAT and The Corner House believe that Parliament should urgently review the political, legal and constitutional issues raised by the judicial review. The two groups are calling for changes in the law so that prosecutors are given explicit powers to resist threats to the rule of law unless those threats create "a situation of necessity".
There is also an urgent need to strengthen parliamentary scrutiny of the advice upon which any decision involving national security grounds is taken. In addition, there is an overwhelming case for modernising the current constitutional arrangements between the government, the judiciary and parliament in order to give the courts greater scope to hold the government to account if it misuses its power in the name of national security. As it stands, the Lords’ ruling means that a UK government can simply invoke "national security" to stop embarrassing corruption investigations and the law can do nothing about it. "The dangers of abuse are obvious", we stated.
In February 2009, a clearer example of such abuse than the BAE-Saudi case became public. Binyam Mohamed, a British resident held in the US’s Guant�namo Bay detention camp, was facing a possible trial before a military tribunal. He argued that the evidence against him had been obtained under torture. The UK Government confirmed to his UK lawyers that it had been given documents from US intelligence sources detailing Mohamed’s treatment since he was arrested in Pakistan in April 2002, transferred to prisons in Morocco and Afghanistan, and then to Guant�namo Bay. Paragraphs within these documents are thought to substantiate his claim that he was tortured during this time – and to implicate British security services in the torture. In August 2008, the UK High Court ruled that the Foreign Office should hand these documents over to his lawyers as the information contained in them was "not only necessary but essential for his defence". The Foreign Office did so, but only on the understanding that the documents should not be made public; several national newspapers, therefore, went to court arguing that it was in the public interest for the documents to be generally released.
On 4 February 2009, two High Court judges ruled that they had no alternative but to order that the documents concerning Mohamed’s treatment could not be made public. This was because the UK Foreign Secretary, David Miliband, had told the court that the US had threatened to stop sharing intelligence with the UK if they were, thereby putting at risk "the public of the United Kingdom" and endangering the UK’s national security. The judges stressed that only the Foreign Secretary’s statement led them to order that the documents be kept secret; without Miliband’s claim about the "gravity of the threat" from the US, they would have ordered the evidence to be revealed. The judges cited the SFO-BAE-Saudi Law Lords ruling as a precedent for the legality of acceding to such a threat. The judges held that:
"The issue which arises here is not the balance between the public interest and fairness to a litigant by making material available to him to enable a fair trial to take place (as has been the position in most cases . . .) It is a novel issue which requires balancing the public interest in national security and the public interest in open justice, the rule of law and democratic accountability."
The judges highlighted two measures that are supposed to act as checks and balances on the Executive: the parliamentary intelligence and security committee (ISC), and the Attorney General. Yet the ISC meets in secret, its members cannot discuss its proceedings, its reports go only to the prime minister who decides what to publish from them – and what not to publish.
Clive Stafford Smith of Reprieve (an organization that uses the law to enforce the human rights of prisoners), which represented Binyam Mohamed, said: "For the foreign secretary to give into these illegal demands by the [former US] Bush administration is capitulation to blackmail, pure and simple". He also wrote:
"When history reviews the past eight years [of the US George W Bush administration], the most lasting concern will not be ill-advised experiments such at Guant�namo Bay. Rather, it will be the creeping tendency of democratic governments to use ‘national security’ as an excuse to keep the truth from those who have elected them. After all, if the US and the UK can conspire to suppress evidence of torture, what other dark secrets can they hide?"
The information kept secret in the documents does not concern intelligence material but acts by interrogators. Torture is a crime recognised internationally that can be tried in any country, irrespective of where it took place or the nationality of the alleged perpetrator.
Within 24 hours of the judges’ ruling that they could not order the documents to be made public because of the US threat to the UK’s national security, Miliband told Members of Parliament that the US had not, in fact, made any such threat to cut off intelligence links with the UK. Moreover, it emerged that the Foreign Office itself had solicited a letter from the US to back up its claim that if the evidence was disclosed, the US could stop sharing intelligence with the UK.
If the BAE case did not seem to be a clear enough instance of the government’s abuse of national security arguments to protect its friends and interests, then this surely is. As Guardian columnist Simon Jenkins wrote, "the abuse of this phrase [national security], now applied to anything from memoir censorship to parking restrictions, has become a sick joke. . . . Executive discretion has been deployed to conceal an assumed act of criminal torture . . . Fear of offending an ally . . . is no grounds to suppress evidence of torture".
An editorial in The Observer concluded, "The real threat to the national interest comes if the rule of law is perceived as subordinate to the government’s interest in protecting itself from scrutiny".
Binyam Mohamed was released from Guant�namo Bay on 23 February 2009, when he came to the UK. Lawyers acting for him and the newspapers asked the judges to reopen the case, which they agreed to do in March 2009.
We began to compile this timeline in December 2006 to keep a record of the judicial review process. Even though we brought it to a close over two years later in February 2009, CAAT and The Corner House will continue to challenge and address the many ongoing issues highlighted by the case.
We should like to thank all those who supported the judicial review in myriad ways – and invite you to continue challenging as well . . .