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Lords back SFO over decision to end inquiry into BAE

The House of Lords has backed the Serious Fraud Office's decision to drop its investigation into the £43bn arms deal between BAE Systems and Saudi Arabia, saying the investigation could have put British lives at risk.

The five law lords unanimously overturned a judgment by the High Court in April, which said the watchdog had acted "unlawfully" in halting its inquiry into alleged bribery and corruption over the Al-Yamamah deals, in which BAE supplied Tornado and Hawk fighter jets to the Saudis in 1985.

The ruling means that the SFO acted lawfully when it dropped the case over fears that the Saudis would withdraw co-operation over terrorism intelligence.

Lord Bingham of Cornhill, the senior peer on the panel, said: "The director's decision was one he was lawfully entitled to make. It may indeed be doubted whether a responsible decision maker could, on the facts before the director, have decided otherwise." He added that the decision was "courageous". Lord Roger, another peer presiding over the SFO's appeal, added: "The director concluded that he had no option... British lives would be put at risk."

The SFO welcomed the ruling and said its former director Robert Wardle had been vindicated. It launched the investigation in 2004 into alleged bribery and corruption related to the deal. BAE and the Saudis deny any wrongdoing. But the then Attorney General, Lord Goldsmith, warned that it could damage national security as it threatened to sour diplomatic relations with Saudi Arabia, and he urged the SFO to drop the case.

The move was challenged by the environmental and social justice campaign group Corner House and the group Campaign Against Arms Trade (CAAT).

The case went to the High Court, where, in April, Lord Justice Moses and Mr Justice Sullivan overturned the SFO's decision, saying: "We fear for the reputation of the administration of justice if it can be perverted by a threat." The campaigners were not impressed with yesterday's verdict. Nicholas Hildyard of The Corner House, said: "With the law as it is, a government can simply invoke 'national security' to drive a coach and horses through international anti-bribery legislation, as the Government has done, to stop corrupt investigations."

Separately, a joint committee of MPs and peers scrutinising the Draft Constitutional Renewal Bill is to back the Attorney General to keep his legal and political function and give direction in individual cases, including over national security.