The Daily Mail | February 15, 2008

Investigators working on the fraud probe into Saudi arms deals were told they faced "another 7/7" and the "loss of British lives on British streets" if they continued the inquiry, secret papers reveal.

Saudi Arabia's rulers threatened to make it easier for terrorists to attack London unless the corruption investigation by the Serious Fraud Office (SFO) was stopped, according to documents shown to the High Court.

The previously secret files reveal the warning by the Saudis that they would go ahead and cut off intelligence links with the UK about potential terror strikes and suicide bombers.

It was alleged in court that Prince Bandar, the head of the Saudi national security council, was behind the threats to withold information.

During the hearing, he was accused of flying to Britain in December 2006 and issuing the warning which forced Tony Blair to call for an end to the investigation into alleged bribery and corruption involving deals between British arms firm BAE Systems and Saudi Arabia.

Lord Justice Moses said yesterday that the Government appeared to have simply "rolled over in the face of" Saudi threats that they would pull out of lucrative arms contracts if the bribery investigation went ahead.

He also attacked Mr Blair for "holding a gun" to a prosecutor's head to make sure he dropped the probe.

The former Prime Minister was singled out for cricicism during the case in which two pressure groups are challenging the decision by the director of the SFO to drop the investigation.

Dinah Rose QC, for the groups, also accused him of overstepping the mark by applying "irresistible pressure" to ensure the probe was halted.

It also emerged that 24 hours after Foreign Office officials met Prince Bandar, a Saudi national security adviser, No 10 informed the Attorney General they wanted to make further representations on the case.

Three days later Mr Blair wrote to the Attorney General.

Helen Garlick, assistant director of the SFO, told the court that officials from the Foreign Office had told her that "British lives on British streets" were at risk.

She said: "If this caused another 7/7 how could we say that our investigation, which at this stage might or might not result in a successful prosecution, was more important?"

The SFO inquiry arose out of BAE's £43billion Al-Yamamah arms deal with Saudi Arabia in 1985, which provided Tornado and Hawk jets plus other military equipment in 1985.

In December 2006 the then Attorney General, Lord Goldsmith, announced the probe was to be discontinued, citing national security considerations.

The Attorney General said that would have "seriously negative consequences" for UK national security and the "highest priority foreign policy objectives in the Middle East".

But Ms Rose argued the real reason for dropping the investigation "was not national security but the commercial situation" and the decision violated the OECD Anti-Bribery Convention.

The decision was also based on "tainted advice" and was unlawful because the Director had permitted threats, or blackmail, to influence his decision.

Ms Rose said it was taken following renewed threats by the Saudi Arabian royal family that if the investigation continued the Saudis would cancel a proposed order for Europfighter Typhoon aircraft and withdraw security and intelligence cooperation.

She told Lord Justice Moses, sitting with Mr Justice Sullivan at London's High Court: "These threats were apparently made following BAE's discovery that the SFO was about to obtain access to details of various Swiss bank accounts."

It was widely reported that the threats came from Prince Bandar, a national security adviser in Saudi Arabia, and his agents, who were under investigation by the SFO.

Ms Rose said the Attorney General had formerly held the view that it would not be right for the SFO to discontinue its investigations as a consequence of the threat by the Saudis.

On December 5 2006, Prince Bandar visited London and met Foreign Office officials, and the following day the prime minister's office informed the Attorney General that Mr Blair wanted to make further representations before any offer of a possible plea bargain was made to BAE.

Ms Rose said that three days later Mr Blair wrote a "personal minute" to the Attorney General, attaching assessments prepared by Cabinet Office and Foreign Office officials.

In a meeting with the Attorney General (AG) dictated on December 11 a "carefully drafted" letter recording the meeting disclosed the prime minister expressing the view that this was "the clearest case for intervention in the public interest" he had seen.

Ms Rose told the court: "We see mounting pressure on the AG and the SFO - the same considerations being hammered home. There were repeated efforts by the UK ambassador to Saudi Arabia and personal overtures from Tony Blair.

"Irresistible pressure forced them (the AG and SFO Director) to drop the prosecution."

This had led to the Attorney General "taking an impermissible approach and giving in to threats".

The prime minister had "stepped over the boundary between what is a permissible exercise and impermissibly attempts to influence or dictate a decision on the investigation by expressing his view, said Ms Rose.

"This is the clearest case of intervention that goes too far."

The current Director of the SFO is opposing the legal challenge, arguing that Mr Blair had not said anything improper and was doing no more than perfectly properly "giving the Attorney General a gauge by which to measure the seriousness of the threat to national security."

The prime minister did not tell the Attorney General, let alone the Director, what his decision ought to be.

The decision whether or not to continue the investigation had been taken independently by the Director and the Attorney General.

Lord Justice Moses suggested a possible view was that it was "just as if a gun had been held to the Director's head".

Ms Rose agreed and said there had been a number of things the Government could have done, other than give in to Saudi threats.

The Saudis could have been told that, if they had withdrawn their co-operation on intelligence and anti-terrorist matters, they would have been in breach of their own international law obligations.

Lord Justice Moses suggested the Saudis could have been told that, while the UK could not interfere in matters of Saudi domestic law, nor could they interfere in UK domestic law.

The judge said that - "as far as we know" - that had not occurred.

The court had seen nothing to suggest anything other than that the Government had "rolled over in the face of (the threat)".

Dealing with the blackmailing nature of the Saudi threat itself, the judge said: "If that had happened in our jurisdiction (the UK), they would have been guilty of a criminal offence."

Ms Rose said: "Yes, perverting the course of justice."

She said the SFO Director had misdirected himself under Article 5 of the OECD Anti-Bribery Convention by taking account of the potential damage a criminal investigation or prosecution over the BAE allegations might cause to UK relations with Saudi Arabia.

It was "an irrelevant consideration", even if there was concern that an investigation could adversely affect national security.

Matters of national security might be relevant if they concerned imminent danger to the public, but that was not the BAE case.

The idea that "national security trumps all" was "inadequate", argued Ms Rose.

Corner House's director, Nicholas Hildyard, said in a written witness statement read by Ms Rose that bribery and corruption distorted markets and damaged national economies.

"Although some companies have sought to excuse bribery on the basis that jobs would be lost if bribes were not paid, the flip side of the coin is the extent to which companies lose business either because they are unwilling to pay bribes or because they are out-bribed by competitors," he said.

Corruption also had profound implications for national security, as acknowledged by the leaders of all G8 countries, including Mr Blair when he was Prime Minister.

They recognised that "corrupt practices contribute to the spread of organised crime and terrorism, undermine public trust in government and destabilise economies".

The Foreign Office recognised that weak or failing states were frequently safe havens for terrorists.

Corruption among ruling elites in the Middle East had been cited as a factor motivating the leadership of terrorist organisations such as al Qaida, one of whose stated aims was the elimination of corrupt regimes.

Mr Hildyard said Saudi Arabia had assured the United Nations that it would comply with its duty of co-operation in anti-terrorist matters.

Its willingness to co-operate with the UK was so strong that it had signed a "memorandum of understanding" to facilitate such contact.

Yet, said Ms Rose, the Saudi government had issued threats aimed at stopping the BAE inquiry and the Director of the SFO had unlawfully submitted to those threats.

The High Court case was brought by Corner House Research, which campaigns against corruption in international trade, and the Campaign Against the Arms Trade.

They say the decision of SFO director Robert Wardle should be quashed because it had come about following ministerial pressure and was taken on commercial grounds rather than national security.

Lord Justice Moses suggested the pressure was such that it was "just as if a gun had been held to the director's head". The hearing continues.