Central Europe

Investigations into BAE deals with the Czech Republic, Hungary and Austria

In 1995 Sweden's Saab and BAE set up a joint venture to sell the Gripen fighter, made by Saab. The Czech government wanted to buy fighter aircraft and, in 1999, asked companies to submit proposals. Gripen was one of five companies which bid, but the other four withdrew from the contest in 2001, alleging that the whole process seemed corrupt.

The Gripen team sorted out a generous finance package and offsets - contracts worth 150% of the cost of the aircraft were to be placed with Czech companies. In December 2001 there was a provisional agreement for the sale of 24 Gripen planes costing £900 million. However, the Czech parliament had still not approved the deal when, in August 2002, the country suffered devastating floods. The clean up costs meant the planes were no longer affordable and, by the end of 2002 cheaper alternatives were being sought. This culminated in a £400 million lease agreement for 14 Gripens being signed in June 2004.

It was a similar story in Hungary, where, in 1991, the government rejected the advice of its National Security cabinet to buy F-16s. It decided instead to lease 14 Gripens at a cost of $500million, it was said because Saab-BAE had a better offset deal. In Austria, in 2003 and after years of deliberation, it was confirmed that 18 Eurofighters would be bought at a cost of $2.24billion. There were later threats to cancel the deal on grounds of cost and because of bribery allegations, but, in 2007, the Austrian government decided to go ahead because the cancellation costs were so high.

In October 2008 the UK Serious Fraud Office (SFO) interviewed the Austrian Count Alfons Mensdorff-Pouilly whose company is said to have had a contract with BAE since 1992. In March 2009 he was arrested by the Austrian authorities and questioned about an £11 million payment allegedly made to him by BAE. It was alleged that monies reached ministers and others via a complex web of small companies, many of them registered in such places as the Bahamas and the British Virgin Islands. He was charged by the SFO on 29 January 2010 with conspiracy to corrupt in connection with BAE's deals with eastern and central European governments including the Czech Republic, Hungary and Austria. Julian Scopes, who had been BAE's central Europe chief, had also been interviewed by UK police in October 2008.

As part of its deliberations over whether to buy the Gripens outright after the lease agreement ends in 2014, the Czech authorities announced in June 2011 that they were reopening the inquiry into the corruption allegations around the original procurement. The SFO has been approached for assistance and, during a visit to Prague, Prime Minister David Cameron said it would cooperate fully.