Jeremy Warner's Outlook: UK comes before the court of the OECD over Saudi bribery allegations at BAE Systems

Effective it won't be, but profoundly embarrassing it just might. Scores of foreign government officials and bribery experts descend on Paris the week after next under the auspices of the OECD to adjudicate on the UK's decision to abandon a Serious Fraud Office investigation into whether BAE Systems paid bribes to help secure the Al Yamana arms contract in Saudi Arabia.

At the time, the Government cited concerns over national security as the reason for the decision. The Saudis were threatening to cut off diplomatic relations, and with them any intelligence flow on terrorist activity, if the SFO proceeded with attempts to obtain discovery in various Swiss bank accounts.

On the face of it, the decision is none the less a breach of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, to which Britain along with other members of the OECD is a signatory.

The Convention carries the status of a treaty, so any breach would be illegal under British law. The purpose of the OECD meeting is to review Britain's position under the Convention, to decide whether a second, on-site, visit to investigate the matter further might be warranted, and/or to issue a statement of condemnation.

British officials have been furiously lobbying their overseas counterparts in an attempt to defuse the situation. They can probably rely on the sympathy of the US and other friendly states, but the emphasis has to be on the word "probably". If Britain is winning contracts by unfair means, then even friendly states thereby disadvantaged are unlikely to be supportive.

The OECD has no powers and cannot impose sanctions, but its strictures would certainly count for something, and might inflict considerable damage on British interests abroad. Yet the pragmatic question has to be whether the national interest is harmed more by flouting the Convention than allowing the SFO investigation to run its course, prompting the Saudis to hit the nuclear button. If the answer to this question is no, the Attorney General can presumably sleep easy in the knowledge that he has done his duty.

The OECD Convention states that signatories 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". The Saudi threat to cut off diplomatic ties is therefore no defence. National security issues just might be. These are not mentioned in the Convention.

As an exercise in international co-operation of the sort the OECD is meant to promote, the Convention is plainly a good thing. Yet this is probably the first time it has been tested on a contract of such size and importance. You only have to ask yourself what would have happened if the law had been allowed to run its course to see why in cases like this such treaties become problematic.

BAE has always denied any wrongdoing. OK, so it would do, wouldn't it, and there is certainly evidence to suggest otherwise. Yet what if at the end of the investigation BAE is indeed found to be innocent, or, at the very least, no credible case can be mounted against it? This outcome has always seemed to me highly probable, as no member of the Saudi royal family is ever likely to be persuaded to testify against BAE in a British court to the effect that he had been bribed.

In the meantime, the whole thing would have done untold damage to British national interests. The contract would have been cancelled at a cost of thousands of jobs, technological development dependent on the contract would be compromised, diplomatic relations with Saudi Arabia would be toast (this would perhaps be the least of any concerns), and yes, intelligence on al-Qa'ida might be curtailed.

Not a happy result. The only people rejoicing in the matter would be the UK's industrial competitors, for Britain, having washed its paymasters' dirty linen in public, would never win another order in the Middle East. Free markets are perverted by corruption, and their integrity is undermined. The use of bribery, moreover, gives succour to rotten, suppressive regimes and frequently prolongs their existence.

To pursue such cases, even when the evidence is disputed and the exercise is profoundly damaging to national interest, is brave and, for the countries that do it, a matter for congratulation. Yet in truth, who actually ploughs this principled furrow?

Some of our foreign peers, including the US and France, have a better record than us in pursuing bribery allegations. Britain has been dragging its feet since the Convention was agreed in 1998. Yet there is a world of a difference between the small-fry cases of bribery we see successfully prosecuted in other countries and something like this, where there is bound to be considerable collateral damage if it were allowed to proceed to an all-too-likely inconclusive result. I doubt others would act differently in similar circumstances.

Gerald Corbett's poisoned chalices

Gerald Corbett is hanging up his boots as chairman of Woolworths after six fairly miserable years at the helm, at least in so far as investors are concerned. The shares are hardly any higher than they were when he took charge, at the time of the Woolies demerger from Kingfisher.

Mr Corbett is still best known as the man who was chief executive of Railtrack at the time of the Hatfield rail crash, an occurrence for which he was understandably crucified in the press. Later, he was prosecuted for it, though the case against him eventually collapsed. The crash, which led directly to the effective renationalisation of Railtrack as Network Rail, is still recent enough to evoke strong passions, yet I always had some sympathy with Mr Corbett's position.

It was an impossible job with impossible demands. On the one hand was a government determined to cut public subsidy, and on the other were investors insistent on ever higher rates of return. Throw in an ageing infrastructure where traffic was far in advance of predictions, and the upshot was quite literally an accident waiting to happen.

The primary blame must go to the manner in which the railway was privatised. Whether the billions of extra public money subsequently poured down the track has done any good is debatable. Punctuality is still worse than it was pre-Hatfield, and, as last weekend's crash bears witness, issues with safety remain.

As for Woolies, Mr Corbett took on a bit of a poisoned chalice with that job, too. By the time it was demerged, the company had been almost entirely stripped of its freeholds, saddling the ongoing operation with high rental payments to the new owners. The company was also stuffed to the gunnels with debt and obsolete stock.

The strategy since then has been hit and miss. Woolies now has a decent wholesale business in books and entertainment products, but the retail side continues to struggle. Unlike its namesakes in other countries, the British Woolies has failed to transform itself into something more inspiring. It essentially remains a candy, toy, CD and bric-a-brac store for the lower orders.

Could not Woolies have become something like the 100 Yen stores in Japan, which have done extraordinarily well out of the "everything for 100 Yen or less" selling proposition. No such reinvention has emerged.

Much of the original share register chose the opportunity afforded by a proposed takeover offer by Apax to bale out. Fidelity and others read it just right, for the bid never materialised, and the shares have never seen that level again.

The new man in the hotseat is to be Richard North, mysteriously ousted a few years back as chief executive of Intercontinental Hotels after he had managed to double the share price.

His job is unlikely to be any easier than Mr Corbett's. First up is whether to stick with the present chief executive, Trevor Bish-Jones, whose contract comes up for renewal next year.

j.warner@independent.co.uk