Corruption Report
The UK government and arms trade corruption: a short history
Abstract
This is the fourth in our series of Goodwin Papers. Download the PDF or order a printed copy from the office.
Based on archival sources, this discussion paper examines the UK Government's approach to corruption within the UK arms industry and shows it has very dirty hands. At the time the Defence Export Services Organisation was founded it was known at the highest level that corruption pervaded the arms trade, but civil servants were told to look the other way and not ask awkward questions about the deals they were helping to seal. Hard evidence of official knowledge of corruption in arms deals in Venezuela and Indonesia is unearthed for the first time. Hitherto unseen documents from the 1970s show how, when confronted with the problem of corruption in the arms trade, officials at the highest level were at pains to ignore their suspicions and devise guidelines to avoid addressing the issue, even allowing publicly-owned companies to continue employing 'agents' with no questions asked. It puts the continuing debate over the Export Credits Guarantee Department's anti-bribery procedures into sharp perspective and demonstrates the incredible irresponsibility of the MoD, DTI, FCO and ECGD in knowingly fostering a corrupt industry.
Some of the main National Archive documents (in pdf format)
Venezuela
- A 1967 letter from the UK Embassy in Caracas to the Foreign Office saying the "question of bribery" would "almost certainly" arise on Government-to-Government arms sales to the country and asking whether it is acceptable practice in Government-to-Government deals.
- A reply to the Embassy in Caracas from a senior figure in the Defence Sales Organisation (DSO) in the MoD. It categorically states bribery occurs "day by day" in the arms trade, says DSO turns a blind eye and focuses on achieving sales. It states the role of agents is to pay bribes, encourage unnecessary military spending and that their work is "complementary" to DSO's.
Indonesia
- A 1973 cable from the Naval Attaché in Jakarta to the MoD. It notes an Indonesian Admiral.s visit to London has been cancelled to protect a "mark up which would presumably be shared among people in high places in Jakarta" (of around £2.25 million in current prices) on an arms sale from the UK to Indonesia.
- Another 1973 cable from the Defence Attaché in Jakarta to the MoD reveals Embassy suspicion that the Indonesian Defence Attaché is trying to arrange a "source of supply" on a sale of 30mm ammunition to Indonesia "which will give him a cut".
High-level discussions on corruption
- A DTI briefing paper lays out with startling frankness high-level Government knowledge of corruption in deals by UK companies overseas. It shows how the Government had knowledge of dubious commissions through Exchange Control and that the ECGD backed such deals with public money. It rejects unilateral action on the issue.
Guidelines on the use of agents in arms sales
- The first guidelines in 1967 on the Defence Sales Organisation's use of agents in arms deals. Note the rules did not preclude the employment of those inside the client government as agents, and no questions had to be asked about what activities the agents undertook.
- The guidelines of June 1976 issued by MoD Permanent Secretary Sir Frank Cooper. The guidelines ban the use of agents by DSO, but permit it by nationalised and private companies, and do not require MoD officials to ask any questions about the activities of agents employed in the deals they were promoting.
- The amended guidelines of August 1977 issued by Sir Frank Cooper require the MoD to gain "assurances" from firms who want to pay commissions to agents on deals taking place under a Government-to-Government umbrella. No further scrutiny about the activities of agents employed is required.
More dodgy deals
- A 1976 letter from BAC (the nationalised forerunner to BAE Systems) to Sir Shapoor Reporter (via the Head of Defence Sales in the MoD) thanking him for his assistance on a Rapier sale to Iran. At a 1977 trial one of the defendants implicated Reporter in corruption.
- Another 1976 letter shows Sir Shapoor Reporter also had links with Marconi.
- A 1967 letter from the MoD announcing the appointment of a Dutch agent to the Treasury. Although the Treasury civil servants appear to believe the agent is Prince Bernhard (later removed from public duties after having allegedly requested millions in commission from Lockheed on the Dutch purchase of F-104 Starfighter aircraft), they endorse the appointment.
These documents are published courtesy of The National Archives
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