Campaigners win judicial review of BAE arms case

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Anti-arms campaigners have won a judicial review of last year's decision by the Serious Fraud Office to end its investigations into the defence company BAE's contracts with Saudi Arabia.

The judgment will be hugely embarrassing to the Government, which opposed the review and has consistently backed the SFO's decision to drop the case.

Yesterday two High Court judges granted an application from the Campaign Against the Arms Trade and Corner House for the right to mount a full challenge to the SFO, which in December last year dropped an inquiry into allegations that BAE had made secret payments to Saudi officials in order to secure a series of massive contracts.

Lord Justice Moses and Mr Justice Irwin said the case involved "matters of concern and public importance", and that the challenge "cries out for a hearing". The judges, who will now decide how to proceed with the case, likely to be a two-day hearing in the new year, said they were "surprised" the Government had opposed the campaign groups' application.

The SFO's decision last year prompted speculation that it had come under pressure from the Government, as ministers became concerned about a deterioration in relations with Saudi Arabia. The SFO's director, Robert Wardle, insisted he alone had taken the decision to drop the probe, begun in 2004, following advice that failing to do so might damage national security. Mr Wardle said he would have preferred to continue the investigation into BAE, which centred on the £50bn Al Yamamah arms deal signed in 1986, and believed it was progressing. However, Lord Goldsmith, then the Attorney General, said he thought there was little chance of a successful prosecution.

In yesterday's hearing, lawyers for the campaign groups argued that the SFO had failed to consider the threat to national security posed by discontinuing the investigation, which, they said, could leave the UK open to additional resentment from international foes. The groups also argued that, in any case, the OECD's anti-bribery treaty, to which the UK is a signatory, did not allow countries to suspend such investigations for national security reasons.

A judicial review of the SFO's decision will consider the legality of dropping the inquiry, rather than investigating the allegations against BAE. Nevertheless, the hearing will embarrass ministers, who had hoped to put the controversy behind them. It will also cause irritation at BAE, which is facing a separate inquiry into Al Yamamah from US regulators.

Symon Hill, a spokesman for the Campaign Against the Arms Trade, said: "This is brilliant news for all those who have campaigned against the influence that arms companies bring to bear on government."

A spokesman for BAE, which has always denied any wrongdoing, said yesterday: "This is a matter for Corner House, the CAAT and the Government – we were not a party to this case."

A spokesman for the SFO declined to comment.