CAATnews Feb-March 2007 - Cover Story

WHERE THE POWER REALLY LIES

Ann Feltham and Ian Prichard outline the background to CAAT’s attempt to re-instate investigations into arms trade corruption

The judicial review is launched

At five o’clock in the afternoon on Thursday 14th December a journalist rang the CAAT office and we learned that the Serious Fraud Office (SFO) was discontinuing its investigation into allegations of corruption with regards to BAE Systems military contracts with Saudi Arabia. Symon Hill, our Media Co-ordinator, was quickly alerted. Another call went to Saudi Arabia researcher and Steering Committee member Nicholas Gilby. However, Newsnight had got to him first and he was already on his way to a television studio.

Shortly afterwards we talked to The Corner House, a social and environmental justice group, with which CAAT has liaised on export credit and corruption issues for several years. In 2005 The Corner House brought a successful claim for judicial review against the Department of Trade and Industry’s decision to weaken anti-corruption procedures. Leigh Day & Co, the lawyers used then, were brought on board. A few days later, acting on behalf of the two organisations, Leigh Day & Co issued letters to the Director of the Serious Fraud Office, the Attorney-General and the Prime Minister laying out the intention to judicially review the decision.

Allegations

In 1985/6 and 1988, the UK signed massive arms deals with Saudi Arabia revolving around the sale of British Aerospace (as it then was, now BAE Systems) Tornado fighter and ground attack aircraft. The deals were known as Al Yamamah. As well as actual hardware, the package included servicing and training.

Within weeks of the first Al Yamamah agreement, there were rumours of corruption. These persisted, and the National Audit Office (NAO) launched an investigation in 1989. The resulting 1992 report was read by only two MPs and never published.

Allegations about the Al Yamamah deal continued to surface beyond the NAO report. From September 2003, Guardian reporters David Leigh and Rob Evans wrote a series of articles about an alleged BAE Systems “slush fund”. It was not, however, until November 2004 that the SFO announced that it, together with the Ministry of Defence Police, had “commenced an investigation into suspected false accounting” with regard to BAE Systems and the company’s military contracts with the government of Saudi Arabia.

The push continues

The push to sell arms, especially the Eurofighter Typhoon, to Saudi Arabia continued. Prime Minister Tony Blair visited Riyadh in July 2005 to argue BAE Systems’ case and then Defence Secretary John Reid followed in his footsteps with a two-day visit three weeks later. In September the Guardian alleged that the Saudis had made three demands in order for BAE Systems to win the contract. These included ending the SFO investigation.

The Prime Minister’s sales efforts paid off. In December 2005 an “understanding” with Saudi Arabia was signed, followed in August 2006 by an “agreement”. Under these BAE Systems will supply 72 Eurofighter Typhoon jets, reportedly costing the Saudis about £5.4 billion. Additional equipment such as onboard missiles bring the total to £10 billion.

The first 24 planes for Saudi Arabia will be taken from those originally destined for the RAF. This makes nonsense of claims that arms exports are necessary to ensure that the UK armed forces are well equipped.

On 30th November, the Government confirmed that the Export Credits Guarantee Department had recently agreed to renew insurance cover for sales of military equipment and related services to Saudi Arabia, including the Eurofighter Typhoon aircraft.

The PR offensive

A final contract for the Eurofighter Typhoons was expected in late 2006, but was said to have been jeopardised by the SFO investigation. From mid-November, there were almost daily reports about concerns for the contract and jobs; BAE Systems and the Saudis, separately, were said to have briefed Lord Bell’s public relations company. At the same time it was reported that the SFO was closing in and had asked the Swiss authorities for access to two named bank accounts.

The stories kept coming – the Saudis would buy from the French instead; the share price was falling; and, again and again, there would be tens of thousands of jobs lost (figures up to 50,000 were appearing without any justification as even a Eurofighter-commissioned report indicated that the deal would sustain fewer than 5,000 jobs in the UK). By early December the Defence Industries Council was writing to all the Cabinet asking for the case to be dropped on economic grounds and the Daily Telegraph said the Saudis had given a ten day deadline for the inquiry to be called off. CAAT did a lot of work correcting the job figures and, with The Corner House, Saferworld and BASIC, sent its own letter to the Cabinet arguing that the SFO inquiry must continue.

The inquiry ends

On 14th December, the Attorney General announced that the SFO inquiry with regards to Saudi Arabia was at an end, citing national security interests. Currently, Saudi Arabia has said the signing of the Eurofighter Typhoon contract is imminent. For all the UK government’s desire to expand its influence around the world, the dropping of the inquiry shows very clearly where the real power lies – with BAE Systems and the Saudi royal family.

Inquiries by the SFO into BAE Systems dealings In Chile, Czech Republic, Qatar, Romania, South Africa and Tanzania are continuing.

The legal challenge

The basis for the legal challenge by CAAT and The Corner House is that:

• The decision was based on considerations of potential damage to relations with Saudi Arabia. This is expressly forbidden under the OECD’s Anti- Bribery Convention;
   
• The Prime Minister, in his advice on the public interest to the Attorney General and the Serious Fraud Office, improperly took into account considerations of damage to diplomatic relations;
   
• The advice given by the Prime Minister amounted to a direction to discontinue the investigation, which is an unlawful interference with the independence of prosecutors under domestic and international law.  

The latest information will be placed on our website.

Who else is complaining

• The ending of the SFO inquiry was discussed at the Organisation for Economic Co-operation and Development’s (OECD’s) Working Group on Bribery in mid-January. The Working Group had “serious concerns as to whether the decision was consistent with the OECD Anti-Bribery Convention”. It will discuss the matter again in March after it has received an explanation from the UK government. The OECD’s Anti-Bribery Convention requires signatories, including the UK, to criminalise the payment of bribes to foreign public officials in international business transactions
   
• Various bodies in the US Congress are talking about investigating the deal now that the UK is not. The Congress is able to do so as BAE Systems’ shares are traded in New York.
   
• Institutional investors including Hermes have written to the Government concerning the impact on the investment climate and financial markets.
   
• Over 130 UK and international non-governmental organisations including Amnesty International, Friends of the Earth and Oxfam, wrote to Tony Blair in mid-January asking him to reconsider.
   
• A multi-party group of MPs has tabled an Early Day Motion calling on the Government to re-open the investigation. See Parliamentary for further details and information on taking action. 

Corruption in Saudi arms deals

Records from the National Archive dating from the late 1960’s and early 1970’s (outlined in CAATnews June/July 2006) show that there was corruption in UK arms sales to Saudi Arabia prior to the Al Yamamah deals, and this was known about by officials in the Government’s Defence Sales Organisation.

The August 2006 Eurofighter agreement was signed on the Saudi side by Prince Sultan, Defence Minister for over 40 years. The National Archive contains a letter, dated 1st May 1971, in which Willie Morris, then UK Ambassador to Saudi Arabia, described Prince Sultan as having “a corrupt interest in all contracts”.

We need your help to overturn the Government’s outrageous decision to end the SFO investigation into BAE Systems’ arms deals with Saudi Arabia. Please make a donation to support our work on this issue. See fundraising for more information.