Al-Yamamah Arms Agreement

Opposition Day — [5th allotted day] – in the House of Commons at 1:32 pm on 7th February 2007.

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Photo of Alan Haselhurst Alan Haselhurst Chairman of Ways and Means 1:32 pm, 7th February 2007

I must announce to the House that Mr. Speaker has selected the amendment in the name of the Prime Minister.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer 1:41 pm, 7th February 2007

I beg to move,

That this House
notes the Serious Fraud Office's (SFO) ongoing investigation into the sale by BAE Systems plc of a military air traffic control system to Tanzania and other arms-related inquiries;
further notes that the SFO has ceased its investigation into BAE Systems plc and Saudi Arabia;
calls for an independent inquiry into the reasons for the ending of the SFO investigation of the Saudi Arabian export sales;
requests that there be laid before this House any papers or reports held by the Comptroller and Auditor General relating to the Al Yamamah arms agreement between Her Majesty's Government and the Government of the Kingdom of Saudi Arabia that have been prepared for committees of this House but not yet laid before it or published;
and reaffirms the obligations of the United Kingdom under the Organisation for Economic Co-operation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

I think that this will be a wide-ranging debate on the whole al-Yamamah saga, but that it will focus specifically on the Government's decision to discontinue the investigation into BAE Systems last month.

The position of the Liberal Democrat party is that the Government's decision has done enormous damage, which has undermined the rule of law and Britain's reputation within the Organisation for Economic Co-operation and Development as a country that applies international law. It has also undermined both our reputation in the developing world—where the Government, through the Chancellor and the Secretary of State for International Development in particular, lecture on corruption—and that of honest, good British companies which are trying to apply the law, whether in relation to financial services or manufacturing. It has also undermined the position of the House because of the anomalous situation in respect of the unpublished Public Accounts Committee report of 15 years ago, which, I understand, no Member present—including you, Mr. Deputy Speaker, and the Chairman of the Committee—has ever read.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee

The hon. Gentleman is right; I have not read it, but let me explain the history. My predecessor as Chairman of the Committee—who was, of course, in the minority Labour party—had a private hearing with the senior Conservative member and the Comptroller and Auditor General. The Comptroller and Auditor General has told me that during that private hearing no evidence whatsoever of corruption on the part of the Ministry of Defence was found. [Interruption.] Well, because the National Audit Office is concerned with the Government and not private companies, there was no discussion of any corruption or alleged corruption by anybody else. Therefore, there is nothing in that report that should alarm the House or lead it to believe that any aspect of the British Government was corrupt.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

As my hon. Friends just commented from a sedentary position, in that case there is absolutely nothing to be lost from publishing it. Moreover, I understand that— The Daily Telegraph has reported thisthere was a second report in 1997, which updated the previous one and is more relevant to the account the hon. Gentleman describes, so why cannot that be published either?

In proceeding with my argument, I wish first to pay tribute to some of the non-governmental organisations that have brought this issue to the light of day, particularly Transparency International, the Campaign Against Arms Trade and The Corner House. I also pay tribute to Members of all parties who have tried to open up this debate. In that regard, I shall start by mentioning the debate in the other place last week led by Baroness Williams. My hon. Friend Dr. Pugh has made a major contribution in his role on the PAC and through his ten-minute Bill. An excellent Adjournment debate was introduced by my hon. Friend Andrew George. Over the years, my hon. Friend Norman Lamb has persistently pursued the issue of corruption and BAE Systems. Pertinent questions have also been asked by my hon. Friends the Members for Hornsey and Wood Green (Lynne Featherstone), for Richmond Park (Susan Kramer), for Cheltenham (Martin Horwood), for Lewes (Norman Baker) and for Somerton and Frome (Mr. Heath).

There has been consistent interest in this issue among not only Liberal Democrat Members, but Labour Members. I can refer back as far as the late Robin Cook who in his attempt to introduce an ethical foreign policy repeatedly ran into a brick wall called BAE Systems. He recorded with some frustration in his diaries that:

"The Chairman of BAe Systems appeared to have the key to the garden door of No. 10".

Other Members have also pursued the matter. I single out Roger Berry, who has tried to do so on a multi-party basis, and Harry Cohen and Clare Short, among others.

I hope that we can also draw the Conservatives into this big tent because they frequently argue their belief in the rule of law. We know that there is some embarrassment over this matter—and events of the past few weeks have reminded us why that is so. It was revealed in the Financial Times that one of the names on the Swiss bank accounts that were being investigated by the Serious Fraud Office was Wafiq Said, who is well known. He is a long-standing, loyal and committed supporter of Oxford university and the Conservative party, and in his time he was, I believe, a close business associate of Mr. Jonathan Aitken, who played a key role in the al-Yamamah affair—as people remember—as a Defence Minister, sandwiched between periods when I believe that he was a paid servant of the Saudi Government with an association with Prince Mohammed bin Fahd.

A few weeks ago, there was a little reported piece of news that the authorities in Gibraltar had decided to grant residency status to Sir Mark Thatcher, waiving their normal rules about people with criminal records. He is now able to enjoy his retirement unmolested by the Inland Revenue, which might otherwise have been particularly interested in how he acquired his personal fortune. We know from the testimony of Mohammed Khilewi and from the large amount of documentation that he brought from Saudi Arabia, and from a deposition in this House made by Tam Dalyell when he was a Member which was based on American and BAE sources, that that fortune was acquired when he was resident at No. 10 Downing street on the basis of the al-Yamamah contract.

However, those documents are small fry. There is an even more important set of documents that briefly appeared in the National Archives, after it had been been unintentionally deposited there by the Department of Trade and Industry. Fortunately, it was copied by the Campaign Against Arms Trade before it was retrieved by the Government. It described the bitter battle that raged in Whitehall in the mid to late 1980s when the then Prime Minister and Michael Heseltine were fighting to ensure that there should be a taxpayers' loan guarantee of the al-Yamamah contract worth something in the order of £1.5 billion—or £2.8 billion at present prices. That was ferociously opposed by the Treasury, the Bank of England and the then Department of Energy as being wholly contrary to British interests and as putting seriously at risk British taxpayers' money. We do not know because none of us has read it, but I suspect that that was one of the elements addressed in the PAC report that we are not allowed to see.

Let me bring the arguments up to date by dealing with the two big sets of unresolved issues that have emerged since the Attorney-General's statement of 14 December. There are two groups of questions that we need to pursue. First, was there a secure basis for investigation by the SFO? We need to remember that the investigation was pursued by, I think, 18 officers over several years, and that it had at last identified two sets of key bank accounts leading to the sources of the inquiry. The inquiry, led by a professional prosecutor, had been advised that it could proceed by its silk, Mr. Tim Langdale QC. The head of the SFO has publicly stated that he believed that there were very good grounds for proceeding with the inquiry.

On the strength of reading the papers for several hours, the Attorney-General came to the conclusion that the case was unlikely to succeed. How is that reconciled with the Attorney-General's acknowledgement toward the end of the debate last week in the other place that

"the SFO contemplated inviting BAE and certain BAE executives to plead guilty to certain charges?"—[ Hansard, House of Lords, 1 February 2007; Vol. 689, c. 380.]

Can the Ministers deconstruct the phrase "contemplated inviting"? My understanding is that BAE and certain of its executives were so invited. Were they, or were they not? Was a plea bargain offered, or not? If there was a plea bargain, what is the basis for arguing that there was no legal case? What is the precise position of the Ministry of Defence police, who were separately pursuing an inquiry into the role of MOD officials, who apparently were aware of the offences being committed, and apparently supported them? Has that inquiry been discontinued? Finally on the broad issue of the investigation, it is reported in the press today that the Attorney-General has launched an inquiry into the SFO's effectiveness in pursuing bribery cases. Is that correct? That is a little like somebody who has just escaped from Dartmoor demanding an inquiry into prison security.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I am grateful to the hon. Gentleman for giving way in his usual, gracious way. Has it occurred to him that an alternative explanation might be that the SFO was delighted to be let off the hook by the Government's decision because it was being very slow and inefficient, and in two and a half years it got absolutely nowhere in pursuing this case—possibly because there was nowhere to get?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

The hon. Gentleman is rather clutching at straws. If there were any hint that that was the problem, the head of the SFO would surely have indicated that he did not have reservations about the eventual decision.

Let me move on to the other issue, which, in many ways, is more serious: national security. I am one of those Members of the House who, in an earlier incarnation—

Photo of John Spellar John Spellar Labour, Warley

Can the hon. Gentleman, who has been speaking for some 11 minutes, tell us whether he thinks it a good or a bad idea to sell planes to Saudi Arabia? Secondly, not once has he mentioned all the jobs that the contract has created for ordinary workers in this country. Does he have no interest in or concern about that issue?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

Yes, the issue of jobs is of course important, and it does concern me and I will return to it. However and as the right hon. Gentleman knows, it is not relevant to the anti-bribery case and is specifically precluded by the convention. There is another issue, which I hope that he will face: whether he believes, however important employment is, that a situation in which jobs are subsidised or underwritten by the taxpayer, underpinned by corruption and subject to blackmail by the customer is sustainable. That said, jobs are clearly important and I will return to that theme.

Let me turn, as I said, to national security. I am one of those Members who have signed the Official Secrets Act and who worked alongside the security services in an earlier job, so I have a great deal of respect for that Act and those services, and we should take very seriously any advice on national security that they give us. The problem here is not the security services, but how their advice has been used. The Attorney-General said in his original statement that

"the Prime Minister and the Foreign and Defence Secretaries ... have expressed the clear view that continuation of the investigation would cause serious damage to UK/Saudi security, intelligence and diplomatic co-operation".—[ Hansard, House of Lords, 14 December 2006; Vol. 687, c. 1712.]

The following day, three broadsheets were briefed, apparently by the head of the Secret Intelligence Service himself, who rejected the assertion that the Saudis would sever links and said that he had refused to sign a dossier stating that MI6 endorsed this assertion in advance. Subsequently, and understandably in view of that, the Government diluted their argument—so much so that, at the end of the debate in the other place last week, the Attorney-General was reduced to producing the following, utterly anodyne comment:

"The SIS has authorised me to say that it is clear about the importance of the Saudi counterterrorist effort to the UK."—[ Hansard, House of Lords, 1 February 2006; Vol. 689, c. 379.]

Well, we can all agree with that.

One of two conclusions must emerge. The Prime Minister has done what he did in the case of Iraq, which was to exaggerate and distort the advice received from the security services; alternatively and much more alarmingly, he was right, and the Saudi authorities, who are supposed to be our allies, are threatening us with terrorism.

Photo of Andrew George Andrew George Liberal Democrat, St Ives

My hon. Friend has kindly acknowledged the debate that took place on 24 January, in which I questioned the plausibility of the claim regarding the national security context in which the decision was taken. Surely Ministers need to demonstrate the plausibility of the view that the Saudis would not wish to co-operate, given that al-Qaeda sees them as one of its main targets.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

One practical way in which the Minister for the Middle East, who I think will be speaking next, could help us is by giving some indication of how the advice from the Saudi Government was received. If it was a formal demarche from the Saudi authorities, that is of a very different order from the British ambassador's having tea with one of his contacts and passing on his impression of what might be the case. It would help if the Minister clarified how we were briefed by the Saudis.

Let me turn to the history of this issue. The al-Yamamah contract originated in the mid-1980s, and the context is often forgotten. It was not achieved primarily as a result of competition and British technological excellence; the context at that time was the very close relationship between Saudi Arabia and the United States, which both sides wished to perpetuate. However, the problem was that, as President Reagan provided Saudi Arabia with more and more sophisticated equipment, there were objections from Israel. Perfectly understandably, the Israelis were concerned about one of their potential adversaries acquiring sophisticated technology. The situation was not helped, of course, by the tirade of anti-Semitic abuse that often comes from the Saudi authorities. Israel protested, and friends of Israel in the United States Congress blocked the F-15 deal, which was in turn passed on to Britain and Mrs. Thatcher.

The Reagan Administration were very anxious to bless this arrangement. They owed the Saudis various favours. They were supporting the Nicaraguan Contras and helping gallant freedom fighters in Afghanistan—such as Osama bin Laden. Reagan was perfectly happy to support this British arrangement, which proved to be one of the largest arms deals in history. It has been worth about £40 billion to date, and could be worth something of the same magnitude again in the future. It is not merely an arms deal, but one of extraordinary complexity that involves two major subsidiary features. One is an offset agreement, which, essentially, is a joint venture set of arrangements under which British companies put in capital and expertise, and their Saudi partners take their cut. There is also an oil element. There was an oil barter arrangement whereby oil was marketed, initially by Shell and BP, and the proceeds were routed through the MOD to BAE Systems.

There was much criticism of these arrangements in the Treasury. Of course, the British taxpayer was taking the risk of oil price fluctuations. One consequence of the deal was that Saudi over-produced and drove down the price of oil, damaged the British North sea oil industry—among other things—and contributed to the lack of capacity that we are experiencing.

Photo of Tobias Ellwood Tobias Ellwood Opposition Whip (Commons)

I am grateful to the hon. Gentleman for giving way and I am conscious of his experience in the oil industry. Bearing in mind not only the question of trade and the £40 billion deal that he mentioned, but the security implications of our relationship with Saudi Arabia and the important question of Iraq, is he suggesting that, if the SFO had continued its investigations, Anglo-Saudi relations would not have been tarnished at all?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

They would not necessarily have been tarnished in the way that has been portrayed by the Government. I am merely echoing the judgments that were made by, for example, the Treasury, the ECGD and the Bank of England, which all considered that that deal was extremely bad for Britain. That was the key point.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I appreciate the hon. Gentleman's point, but I am interested in trying to understand whether with the benefit of hindsight he still considers that the deal was bad for Britain. That was not quite the impression that I had of a deal that had apparently delivered £40 billion-worth of commercial benefits. If we look at the matter commercially, is he now saying that those opinions were right and that the deal was wrong? Or is he actually, as he develops his speech, pointing out how wrong some people were back in the 1980s about whether the deal would endure and confer benefits on the country?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

Perhaps the hon. Gentleman should consult his former colleague, John MacGregor, who has exceptionally strong views about the abuse of taxpayers' money in that context.

At the heart of the controversy is the way in which that complex contract led to corruption. Nobody has ever denied that large commission payments and corruption were involved in this case. Prince Bandar, who was the Saudi ambassador to the United States, fully acknowledged that over three decades roughly £50 million of the £40 billion spent by the Saudis was creamed off in the form of commissions to the royal family, adding, "So what?"

We know—from people who have left the service of BAE Systems and sources such as Charles Freeman, who was the US ambassador to Saudi Arabia, and the CIA, whose material has been published—the way in which the slush funds operated. It is a long story, so I shall give the House a flavour of what happened through one or two vignettes. For example, in 1995, Prince Turki bin Nasr, who was head of the air force and one of the main recipients of commissions, went on a shopping trip. At some point, he and his party must have run out of plastic bags, because they ordered a cargo plane to take the shopping back to Saudi Arabia. They then billed BAE Systems for £165,000. In 2000, the same Minister paid a visit to the then Secretary of State for Defence, Mr. Hoon, and was sufficiently stressed by the experience to need to clock into a health clinic for a couple of days, for which he billed BAE Systems £30,327. We know from the same sources that that Minister was paid roughly £3 million a year. His monthly credit card bill of £100,000 was routinely accepted.

All that was justified—it has just been justified again by Mr. Grieve and Mr. Spellar, a former Defence Minister—in the interest of jobs. As a constituency MP who frequently defends jobs in his constituency, I think that it is proper and appropriate for Members to advance that argument, but the issue is whether those jobs were justified by the way in which this matter proceeded. As I pointed out to the right hon. Member for Warley, those jobs were heavily subsidised and underwritten by the taxpayer, underpinned by corruption and eventually made us subject to blackmail. However, I accept that jobs were created by the project, and my final points centre on that issue. Employment was of course created in that industry and that company. The question is whether the price was worth paying and we need also to ask what that price was.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

The hon. Gentleman may have misconstrued my intervention. I had noted that at an earlier stage in his speech he had suggested that at the time the deals were set up he thought that they would be financially disadvantageous to this country. He left up in the air whether he still held that view. He may have other reasons to object to the agreement, but I wanted to understand his position, especially as he is his party's Treasury spokesman. Does he consider that the deal has been financially disadvantageous to the UK and if so, why?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

I think that it has been financially and economically highly questionable. It is a future issue as well as a past issue, because the ECGD still needs to make a judgment on export credit for the current negotiations. Among other things, it will need to produce a warrant attesting to the fact that no corruption is involved. The issues that the hon. Gentleman raises are therefore highly relevant, not matters of history.

Photo of Tobias Ellwood Tobias Ellwood Opposition Whip (Commons)

Will the hon. Gentleman confirm that had the Liberal Democrats been in power—let us stretch our imagination so far—when this deal came up, they would, knowing everything that they know now, have ignored a £40 billion deal for this country?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

It is economically illiterate to say that any £40 billion deal is acceptable at any price. Had the hon. Gentleman's party known about the corruption involved, I suspect that he would have had great reservations about it.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

Is not the overriding consideration that we live under the rule of law? Members on both sides of the Chamber have suggested that there is a price at which we should suspend reasonable judgment and take the £40 billion.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

The hon. Gentleman puts the point well. That is indeed what is humiliating this country and the Government in our dealings with other OECD countries. We have now signed an international agreement to that effect.

Photo of Malcolm Rifkind Malcolm Rifkind Conservative, Kensington and Chelsea

The hon. Gentleman says that he has reached his final comments, but he has not yet addressed the issue of whether in the rare circumstances in which national security could have been endangered it is legitimate not to pursue a prosecution. Is he saying that, even if he were satisfied that national security might have been significantly endangered by the continuation of the work of the Serious Fraud Office and the bringing of charges, it would still have been wrong to, terminate the prosecution?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

National security considerations must of course be at the centre of decisions of this kind. The point that I made earlier was that all the evidence that has emerged shows that that was not the advice of the intelligence services. Had it been, the story would have been a very different one.

My final points are about the price that we are paying as a country. As Mr. MacNeil suggested, we are paying a price in terms of our respect in the developed world. Britain was admonished several months ago, even before the decision, for being the least compliant country, alongside Italy, in respect of the anti-bribery convention. People may say that such things happen everywhere, and what about the French? But the French have launched 11 prosecutions and initiated a major inquiry into corruption in Elf, which was looting Gabon. Everybody up to the French Foreign Minister was brought before the court. The French judicial prosecutor has commented on the British decision:

"The UK decision is a betrayal of the British people and every principle that Britain is committed to uphold."

We know also that there is serious corruption at the upper levels of German business. Siemens is now being prosecuted and has lost substantial business with Nokia as a result. Volkswagen and Daimler have a bad history of corruption. The difference is that in Germany such behaviour is being prosecuted: in Britain it is not.

Another price is paid in terms of our reputation in the developing world—

Photo of Kim Howells Kim Howells Minister of State (Middle East), Foreign & Commonwealth Office

The hon. Gentleman has just made a serious allegation against BAE Systems —[ Interruption. ] One of his colleagues says, from a sedentary position, "Quite right." The hon. Gentleman has already accused those people of being guilty. He has said that they should be prosecuted and convicted before anyone has reported on the issue, but he should think very carefully before he blackens the character of such people.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

I was going to come on to that point, but I have read the comments by the company carefully, as I was surprised to note that BAE Systems never denied that large commissions were paid. It was open about that, but it has claimed that it was not, legally speaking, bribery because their principal—defined in law—was the Saudi Arabian Government. BAE Systems does not deny what happened, so I am not manufacturing any accusations that are not entirely supported by legitimate sources.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

The hon. Gentleman seems to be moving to a key issue. On the one hand he says that the payments were corrupt, and on the other that the defendants say that no legal corruption was involved. If he is going to accuse people in this country of being corrupt, he must say how corruption, as defined by the Corruption Act 2006, has taken place. I should like to hear what he has to say, as the matter is so important.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

The hon. Gentleman is rehearsing the legal arguments for one side, but there is another side—our Serious Fraud Office. In view of what he has said, it is all the more regrettable that BAE Systems has been denied its day in court, when it could have made these points itself.

As for our relationship with the developing world, many hon. Members will have seen the comments made by Thabo Mbeki to the Prime Minister at Davos, when he accused the British Government of outright hypocrisy. He asked: if the British Government can invoke the national interest as a reason not to pursue an investigation that might have highlighted the crown prince of Saudi Arabia, why should they pursue an investigation into a case that might highlight the vice-president of South Africa? Britain is applying double standards—

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

Just like the Liberal Democrats.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

The hon. Gentleman normally has a higher standard of wit than that.

I was talking about our relationships with developing countries. I do not know whether the Minister for the Middle East has seen the DVD that his Department is promoting around Africa, but it is a sort of do-it-yourself guide to how not to be corrupt. It is entitled, apparently with no sense of irony, "The Crimes of the Establishment". That is the British message to the developing world.

Then there is the impact on the reputation of British companies that are trying to be honest and comply with the law. Several leading financial institutions that are involved in managing City funds have commented on the matter to the Prime Minister. One of the largest, Hermes, said:

"The decision has threatened the UK's reputation as a leading financial centre and will have high long-term costs for business and investment"

The chairman of AngloAmerican, one of our leading multinational companies, said in an email to me:

"I agree that the Government handling of the affair has damaged the reputation of Britain and the efforts of many responsible companies to build transparent relationships in overseas operations and contract negotiations will be set back and affected by suspicion and cynicism."

Photo of John Spellar John Spellar Labour, Warley

Will the hon. Gentleman give way?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

I have given the Minister a go, so I shall just wind up my remarks.

The main and final point that I want to make about the cost of the decision to this country has to do with the damage done to this House of Parliament by the suppression of the report.

Photo of John Spellar John Spellar Labour, Warley

Will the hon. Gentleman give way?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

The right hon. Gentleman can make a speech in due course.

The question that we on these Benches ask is: why has the report—uniquely in the history of the House—not been released?

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee

Does the hon. Gentleman want an answer?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

The hon. Gentleman has tried once, and I am sure that he will have another attempt shortly.

The report was suppressed in 1992, but it is now clear that the reason had nothing to do with national security, because the whole al-Qaeda operation was not in flow then—indeed, it was on our side. The Chairman of the PAC at the time was Bob Sheldon, who said that the report would have embarrassed the Saudis, but how could that possibly have happened? Everything about commissions and bribery in Saudi Arabia is in the public domain already.

It appears that Crown Prince Sultan has been one of the main recipients of the funding. He was described on television by his own nephew as the most corrupt Minister in the world. I cannot imagine that the House of Commons Clerks, or the Comptroller and Auditor General, could craft a more damaging phrase.

The details of the corruption in Saudi Arabia are presented in many publications, but I recommend the one by Mr. Sandy Mitchell and his collaborator Bob Hollingsworth. Mr. Mitchell was a Glaswegian medical technician who was arrested and charged with terrorism because the Saudi Interior Minister, Prince Naif, wanted to pretend that al-Qaeda terrorism was committed not by Saudis but by

"British intelligence and the Jews".

That was the opinion of one of Britain's allies. Mr. Mitchell was detained in prison for three years, brutally tortured and sentenced to be executed—not by the humane method of beheading but by crucifixion. He has, of course, been released, as that sentence was ludicrous even by Saudi Arabian standards of judicial inquiry, but he is a very angry man. He is very angry with the Saudis, but also with the British Government, who dragged their feet repeatedly and made it clear that his plight, and that of his fellow suspects, was far less important than the pursuit of an arms contract in Saudi Arabia.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

Well, I am sure that the Minister who makes that assertion has read Mr. Mitchell's book.

If all those facts are known and in the public domain, why are the Government concerned about keeping the report hidden? It may be that it establishes that no criminal offence has been committed: that is what the Chairman of the PAC says, although I think that he has not read the report, but why can it not be shown to us? What is being concealed? That concealment is making the House look utterly foolish. I and my colleagues believe that the report should be published now.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department 2:16 pm, 7th February 2007

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

"notes that the Serious Fraud Office's (SFO) decision to discontinue its investigation into BAE Systems plc and Saudi Arabia was taken independently by the Director of the SFO on grounds of national security in the public interest and in accordance with the Code for Crown Prosecutors;
further notes that the SFO is vigorously pursuing a number of other lines of investigation in relation to BAE Systems plc;
welcomes the steps being taken by the Government to tackle international corruption;
and further welcomes the Government's commitment to compliance with the United Kingdom's obligation under the Organisation for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.".

I suppose that one could say that this case has it all for the headline-grabbing MP—arms deals, Arab princes and a big corporation, as well as allegations of corruption and of Swiss bank accounts. In reality, however, it is all about the rule of law, and it is on that I want to focus.

Photo of John Spellar John Spellar Labour, Warley

Will my hon. and learned Friend give way?

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I hope that my right hon. Friend will bear with me for a little while.

The Liberal Democrats may use innuendo to claim that there was something wrong with the decision to discontinue the investigation, but the fact is that the investigation into BAE Systems and the al-Yamamah deal was discontinued by the director of the SFO, according to the law. That decision was accepted by the Attorney-General, according to the rule of law. The Liberal Democrats may not like the obligations on prosecutors to consider the public interest—which includes the security of this country—but, according to the rule of law, prosecutors are obliged to do so. In fact, to fail to do so would be to undermine the very rule of law that we in this House should seek to protect.

Decisions like that are not easy. Sometimes, they may be deeply uncomfortable. They sometimes allow opponents to seize the political opportunity to challenge the integrity of the decision, or the integrity of individuals. The consequences in terms of perceptions may also be difficult, but the director of the SFO had an obligation to make a judgment, and he made it with integrity. I refute any claim that it was made with other than complete integrity.

Robert Wardle is a fine public servant. He made a difficult decision, and this House should be supporting him and not making the sort of allegations that we have heard.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

The Attorney-General looked with great care at the details of this investigation. He reached the same conclusion that I did—that discontinuing the investigation was the right thing to do.

The Liberal Democrats do not have to make difficult decisions: all that they need to do is wring their hands and criticise those who do have to make them. That, I suppose, is the nature of their politics. However, those who have criticised this decision need to come clean about what they are saying. Are they saying there was no risk to national security that would justify dropping the investigation? The Saudis were not silent about their concern about the investigation, and anyone who knows anything about the terrorist threat recognises the value of the co-operation of Saudi Arabia in dealing with it. Are the Liberal Democrats saying that the security threat was not as great as we understood it to be? If so, why is their judgment better than those who are best placed to judge the threat? Are they suggesting that it was all about jobs and the economy and not about security issues?

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

Well, the OECD convention makes it clear that it is illegal to bring in economic issues. The Liberal Democrats claim that an improper decision was made, but the director of the SFO has made it clear that he did not bring in economic issues; he made the judgment based on national and international security grounds. The Law Officers have also made it clear that we excluded economic arguments from our consideration.

Are the Liberal Democrats saying that although there was a national security risk the SFO investigation should have continued regardless? Are they seriously arguing that they would have put at risk the lives of our citizens? The more I look at the position of the Liberal Democrats, the more I conclude that it is untenable. Asking questions is one thing, but it is wrong to make implications of improper motives or decisions without sufficient evidence.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I shall give way to the hon. Gentleman because I want him to provide evidence that Robert Wardle, the director of the SFO, made a decision that was improper according to the convention. He knows that Robert Wardle would not do that, so where is the evidence for his allegations?

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

The Solicitor-General knows that no one on the Liberal Democrat Benches has impugned the integrity of the director of the SFO. We have said that we want the Solicitor-General to explain why the Government's explanation has regularly changed. When the Attorney-General was asked in the debate in the other place about the phrase used in the explanation—

"balancing the rule of law against the wider public interest"— why did he say:

"On reflection, I think that there is a risk of misunderstanding in those words ... I am very happy ... to make it clear ... that there is no question of saying that the rule of law in general should be set aside for wider interests of expediency or political or national interest"?——[ Hansard, House of Lords, 1 February 2007; Vol. 689, c. 381.]

That is not what we were told in December, but it is what the Attorney-General said on 1 February.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

What is the hon. Gentleman implying? Does he seriously imply that the person who made the decision—the director of the Serious Fraud Office—did not make it based on the prosecutor's criteria of which the hon. Gentleman is well aware? Those criteria include looking at the evidence and at the public interest. It was perfectly right for the director of the SFO, and indeed for Law Officers who looked at the issue subsequently, to take a view in relation to the public interest. That is according to the rule of law. The hon. Gentleman's innuendo, or assumption, that the procedure was improper is not acceptable.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I shall not give way to the hon. Gentleman again, but I will give way to my right hon. Friend Mr. Spellar.

Photo of John Spellar John Spellar Labour, Warley

I think that my hon. and learned Friend was slightly unfair to say that the Liberal Democrats do not have to make difficult decisions. In fact, they have to make a very difficult decision: whether to give back the £2.4 million they received from the convicted crook, Michael Brown. It would be interesting to know whether they ever intend to give back that money.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I thank my right hon. Friend for that intervention.

Members of the House have not been kept in the dark about the reasons for the decision. There is no mystery about the main issues in the case. The Attorney-General and I have given full explanations in both Houses, answered questions and corresponded with Members of both Houses.

The key issue is the crucial importance of Saudi Arabia as a partner in the UK's fight against terrorism. Saudi Arabia is a source of valuable streams of intelligence on al-Qaeda and other terrorist activity that may represent a threat to our citizens in this country and abroad, and to our armed forces. Saudi Arabia also plays a key role in the Government's efforts to promote peace and stability in the middle east.

If the investigation had gone ahead, the judgment was that there was a real danger that Saudi Arabia would withdraw its co-operation on counter-terrorism. We would be deprived of a key partner in our counter-terrorism strategy and UK lives would be put at risk. The importance of the UK's relationship with Saudi Arabia in the fight against terrorism is clear to everyone.

I want to deal with some of the ill-informed and mischievous comments made by Dr. Cable about the security services and the Secret Intelligence Service. His comments were ill-informed because SIS is clear about the importance of the Saudi counter-terrorist effort to the UK. It would not be possible to replicate the counter-terrorism effort that has been achieved with the Saudis on UK-Saudi aspects of the problem if it were necessary to work at one removed, say through the USA, or some other liaison—if that is what Members would prefer.

SIS has made it clear that it shared the concerns about the possible consequences for the public interest of the SFO investigation. SIS considered that there was a risk to the UK's national security interests from pursuing the al-Yamamah investigation, and had been informed of the threat to curtail operations directly. At no stage did SIS or anyone else who was consulted disagree with the overall assessment that the Saudi threats were real. SIS agreed that, although it did not know for certain that the threat would be carried out, it had to be taken seriously.

Before the SFO decision was taken, the Attorney-General and I discussed the matter with the chief of SIS. His view was that the Saudis might withdraw their co-operation if the SFO investigation continued, and that they might decide to do so at any time. It was estimated that further investigation of the case would take 18 months. That would be 18 months of public pressure on the relationship between our countries, with allegations flying around in the media about the Saudi Government and questions being asked about the dealings of senior members of the Saudi Government—with no guarantee at all of prosecution.

Having been advised of that risk, the director of the SFO concluded that it was not a risk that could properly be run in the public interest and that the investigation should be halted, and he did that according to the law. The Attorney-General agreed with the director's decision to stop the case, having regard to his own view that the case was unlikely to lead to a successful prosecution in any event. The director of the SFO's decision was not easy, but it had to be taken. Those who criticise the decision need to ask themselves what they would have done. Would they have risked throwing away our crucial relationship with Saudi Arabia on counter-terrorism co-operation, for the sake of pursuing an uncertain case?

Photo of Andrew George Andrew George Liberal Democrat, St Ives

The Solicitor-General still needs to address the plausibility of the claim that the Saudis would withdraw their co-operation. Surely, they need co-operation from all international parties, given the fact they are No. 1 on the al-Qaeda hit list. Al-Qaeda's primary aim is the elimination of the house of Saud, so does not the Solicitor-General accept that he must explain the plausibility of the claim that the Saudis would not co-operate?

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

The hon. Gentleman knows the importance of our relationship with Saudi Arabia in with dealing terrorism. Those links have been established at their existing level only in recent years. The amount of information we are receiving is considerable and we want to ensure that it continues at that level. We are all well aware that the Saudis were extremely concerned about the investigation and the way in which certain senior members of their Government— [ Interruption. ] Will the hon. Gentleman stop shouting at me and listen? Perhaps then he will better understand the answer to his question.

Senior members of the Saudi Government were concerned about the nature of allegations from people such as the Liberal Democrats. There were constant innuendos and allegations but little evidence was provided. The SFO investigated the matter for a considerable period—about two years—and when the decision was made to discontinue the investigation it did not have sufficient evidence to prosecute. The SFO would have required at least a further 18 months simply to find out whether it was in a position to prosecute, and even then it may not have been able to do so.

The hon. Gentleman and his colleagues seem content, despite their limited knowledge compared to that of the SFO, to decide that there was guilt on almost all sides. That is the politics of innuendo and allegation—the sort of political opportunism that we have come to expect from the Liberal Democrats, but which is being developed at a brand new level today, to judge from the comments of the hon. Member for Twickenham. I have not had the opportunity to watch the hon. Gentleman strut his stuff in that way before; the innuendo and allegations were traipsing from his lips. People were being accused of all sorts of things and he did not provide the evidence to substantiate that. He suggested a number of examples of events that happened. If he had read with care the statements that the Attorney-General and I made, and the view of the director of the Serious Fraud Office, he would have been aware that the examples that he gave were pre-2002, when the new legislation came in. Basing its view on that information alone, the SFO would not have been in a position to put forward the sort of case that it ought to have done.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

Surely the Solicitor-General is aware that, before 2002, it was still an offence to engage in false accounting and bribery in the United Kingdom and those were among the matters that were being investigated.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

There were investigations going on and the SFO was clear that they would have taken another 18 months, and yet the hon. Gentleman stands in the House and seems to hold the view that he can conclude that all sorts of improper things were being done by people who, at least, have a right to expect that a Liberal Democrat would take the view that someone was innocent until proved guilty. But he is prepared to say, in effect, that people were being corrupt. He needs to be able to substantiate that and I have not heard anything from him that does.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

May I take my hon. and learned Friend back to when he referred to the Attorney-General coming to the decision that the investigation was going nowhere? The SFO was investigating under the law that the Government tightened in 2002. Does he share my surprise at the position of Dr. Cable? The hon. Gentleman said that British Aerospace openly said, "Yes, we paid, but it was to the Saudi Government. It was all out in the open" and he said that everything in Saudi Arabia is in the public domain. Does that approach not suggest that, after a two and half years, because everything was out in the open and there had been no prosecution brought in this country, and that the investigation was just dragging on and going nowhere?

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

The Attorney-General spent not, as the hon. Member for Twickenham put it, a few hours, but several days—I well remember him taking home large bundles of files for considerable periods of time—going through the detail. I spent quite a considerable time looking at the evidence as well, although, I have to confess, not as long as the Attorney-General. He formed the view that it was unlikely for legal as well as other reasons that a prosecution would succeed. It is the case that the director of the Serious Fraud Office thought that there might be some ability to continue investigating and that it might be able to prosecute, but that was likely to take a further 18 months and there were consequences for Britain's national and international security relationships, which were, in our view, likely to be damaged.

Photo of Tobias Ellwood Tobias Ellwood Opposition Whip (Commons)

The Solicitor-General is making the case for security concerns in relation to Saudi Arabia. Were the Serious Fraud Office to continue this investigation, what would be the consequences for the delivery of the 72 Eurofighters?

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

My hon. Friend the Minister for the Middle East will be able to deal with that when he winds up. That is one of the issues that he may well wish to address. Perhaps I could leave that to him, if the hon. Gentleman will allow me.

The hon. Member for Twickenham mentioned an alleged plea bargain. I am told that the company was never invited to make guilty pleas in relation to this matter. That possibility was, however, considered by the SFO. The Attorney-General did not object to it, but had some doubts about whether it would succeed. In the event that course was not followed, because in the meantime the director of the Serious Fraud Office had decided to stop the case on national security grounds.

I will deal briefly with the next matter, because I am not sure that it is a matter for me at all and I am sure that others will deal with it at greater length. In relation to the report by the Comptroller and Auditor General, it is the case that this is not a matter for the Government. The Chairman of the Public Accounts Committee has made the position clear on a number of occasions. The report is covered by parliamentary privilege and our approach is, of course, to comply with that. The report refers to confidential arrangements between the Governments of the UK and Saudi Arabia. The report has not been published because publication would breach the pledge of confidentiality and would therefore harm our bilateral relationships.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

The Solicitor-General has raised the issue that the Attorney-General raised last week in the House of Lords. On what date did the director of the Serious Fraud Office contemplate, to use the words of the Attorney-General,

"inviting BAE and certain BAE executives to plead guilty to certain charges"—[ Hansard, House of Lords, 1 February 2007; Vol. 689, c. 380.]

and on what date was the decision taken that that course should not be pursued?

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I cannot remember the precise date. It would probably be about the end of the first week of December. That is my recollection of when I first heard that possibility floated, but it was no more than that. I would have to check again because I was not directly involved in some of those discussions. Let me write to the hon. Gentleman. In terms of when that course was no longer pursued, the answer is obviously when a decision was made on 14 December not to pursue it. The director of the Serious Fraud Office had indicated his view to us on 13 December. At that point, it was effectively no longer on the table. I am not sure, in a sense, in real terms, that it ever was. It was something that was discussed, but action was never taken on it. I am not aware of any offer that was ever made in relation to a plea bargain. It was merely considered, but the director of the Serious Fraud Office took the view that it should not be pursued.

Mention has been made of the Organisation for Economic Co-operation and Development anti-bribery convention. Let me make this clear: the Government remain entirely supportive of the convention. The SFO director and the Attorney-General are firmly of the view that the decision taken in relation to the Saudi case was wholly compatible with article 5 of the convention. We do not believe that the convention does, or was ever intended to, prevent national authorities from taking decisions on the basis of fundamental considerations of national and international security and we do not believe that we or any other state would have signed up to the convention on that basis.

Stopping the SFO al-Yamamah case does not mean that we are backing off from our commitment to tackle international corruption. On the contrary, we are clear that we need to redouble our efforts. No company is above the law. The SFO is actively pursuing a number of investigations into suspected international corruption involving BAE systems. I do not prejudge any of those investigations. BAE denies corruption in relation to those matters and it is right that it should be given the benefit of the doubt, as should all defendants. For the information of the House, the countries affected are South Africa, Romania, Tanzania and the Czech Republic. There are also inquiries in Chile and Qatar. The SFO is also engaged in seven other cases involving suspected bribery or corruption overseas, as well as fraud. They include investigations relating to Bosnia, Nigeria, Zambia, Costa Rica and Egypt. Those too are active cases. For example, in the Costa Rica case, relating to PWS reinsurance, on 30 January, the SFO and officers of the newly formed City of London police overseas corruption unit executed warrants at six sites in the UK and arrested four people. The Attorney-General has told the SFO that it should pursue those cases vigorously. The clear message is that no British company or individual is above the law or immune from action in this area.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

Is the situation that, at the beginning of December, plea bargaining was being considered in some shape or form and then a couple of weeks later the investigation was terminated?

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

When a decision was made, quite properly and in accord with the law, the director of the Serious Fraud Office believed that national security and the public interest required him to discontinue that investigation. Quite properly, there was some discussion in the SFO in relation to the plea bargain consideration, which was merely a contemplation rather than anything much more than that. But that was not done—I am told that no plea was offered to the company. If the hon. Gentleman has information to the contrary, he should say so. I am acting on what the SFO tells me: there never was a plea bargain, in effect, on offer. It was not there and so, in a sense, some of this discussion is otiose.

The Government are also taking other action in relation to international corruption. The Secretary of State for International Development is co-ordinating the work. The UK anti-corruption action plan was approved at the end of July 2006. That plan focuses on the critical actions needed to investigate and prosecute bribery overseas, eliminate money laundering, recover stolen assets, promote responsible business conduct in developing countries, and support international efforts to fight corruption.

I conclude by saying that, ultimately, this case comes down to the question of whether the SFO should have continued an investigation that risked the UK's national security. The director took the right decision to halt the case. Those Members who would have liked the investigation to continue regardless of the risk to lives and security should have the courage to say so. It is now time for them to put up or shut up. For too long, we have had the politics of innuendo—the gently shaking head that says questions must be asked about the integrity of decision-makers. Well, scepticism has its place, but a surfeit of it brings cynicism and political opportunism where the integrity of every decision-maker is constantly in question. I believe that that slippery politics can itself lack integrity. It enables the purveyors to attack decisions and duck defending their own position.

Photo of Alan Beith Alan Beith Chair, Constitutional Affairs Committee

On a point of order, Mr. Deputy Speaker. Is it in order to question the integrity of other hon. Members, irrespective of whether it comes from the Government Front Bench or anywhere else?

Photo of Alan Haselhurst Alan Haselhurst Chairman of Ways and Means

I would say to the right hon. Gentleman that the comment was not directed at an individual hon. Member, so I took it more as a general comment than one that should be reproved. [Interruption.] Order. The right hon. Gentleman does, however, give me the opportunity to say that temperate, moderate language has always been the hallmark of our debates.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I am grateful, Mr. Deputy Speaker, and I hope that my comments were temperate. I could think of other things that I would like to say, but I am prohibited by your rightful running of operations in the House from saying them. I did feel that some of the comments made by the hon. Member for Twickenham were not appropriate.

The issues in the case are real and serious. It was undoubtedly a very difficult decision for the director to make and subsequently for the Law Officers to consider. Those in positions of responsibility have an obligation to make decisions that are in accord with the rule of law—and that is what happened. Meanwhile, other cases are being actively pursued and our commitment to tackling international corruption remains as strong as it ever was.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General 2:42 pm, 7th February 2007

I congratulate Dr. Cable on presenting a debate on what is without doubt a very important issue. The question of the discontinuance of the Serious Fraud Office investigation, the role of the Attorney-General and the director of the Serious Fraud Office in doing that, and the consultation with Ministers before it took place are all highly legitimate issues for debate in the House. The fact that we have an opportunity to debate them is clearly of great value. I shall come back to that aspect of the matter in a few moments.

I hope that the hon. Member for Twickenham will forgive my saying this, but it is noteworthy that the Liberal Democrat motion was very widely drawn. It is also noteworthy that he did not raise some aspects of the motion at all in the course of the debate, which came as a slight surprise to me. There was no reference to the very important issue of the sale of the military air traffic control system to Tanzania, though that may be because the matter was extensively debated on a Conservative Opposition motion on 30 January.

More tellingly, although the motion calls for an inquiry into the circumstances of the SFO action, the hon. Member for Twickenham made no mention of it. That made me wonder whether his views on the matter were now so set in stone that he did not consider that any independent inquiry was needed in any event— [Interruption.] I hear reference made on the Liberal Democrat Benches to lawyers' comments; the hon. Member for Twickenham will hear more of them in a few moments. As I listened to what he had to say and as I tried to conduct a reasonably objective analysis of some really serious matters, I started to have increasing worries about the way in which he was carrying his reasoning forward.

The hon. Member for Twickenham raised a number of issues about the initial principle of the al-Yamamah agreement. That seems a perfectly legitimate issue of debate. It is an old matter, going back to the 1980s and it was, of course, negotiated by a Conservative Government and, seeing that its provisions have been renewed, continued by a Labour Government. It is, by any showing, an unusual arrangement. It is unusual because it is a Government-to-Government agreement and because of the methods of payment under it, as it is partly paid for by Saudi oil—which is unusual in itself. It is a relationship package at a Government-to-Government level rather than an ordinary commercial agreement. That is perfectly clear. As such, when the hon. Gentleman said that he disliked the arrangements, he was raising a perfectly legitimate point, albeit one that is somewhat ancient history.

I come back to an issue that I raised with the hon. Gentleman when I intervened earlier. What was difficult to understand was how he succeeded—in a virtuoso performance—in conflating his dislike of the arrangements with the suggestion that it was economically disadvantageous. I must say that that was the first time that I had heard that suggested, and it was the point in his argument at which I began to think that I might not be inhabiting the same planet as him. I ask him about it again, as I hope there may be an opportunity to deal further with it in the summing-up. It is possible to argue that we should not have such relations with Saudi Arabia or that such Government-to-Government agreements are undesirable and should never be embarked on, but the suggestion that the agreement is economically disadvantageous for this country requires rather more justification than he was able to provide.

Equally, the hon. Gentleman did not deal at all—or at least he skated over—another important question of whether the agreement as a package was advantageous or disadvantageous for our national security and national interest. I hope that at some point we will hear from the Liberal Democrats whether they believe that the nature of the agreement and the building of relations with another state in the middle east—an area of instability—in the form that the al-Yamamah agreement has undoubtedly achieved is desirable or not. Some of the arguments that the hon. Gentleman went on to make must be viewed in that light, and we are surely entitled to know what the Liberal Democrats think of the basic principle of the security co-operation between the two Governments. As far as I can tell—I look carefully at my notes—that was entirely skated over. That may be convenient for the hon. Gentleman in characterising the Liberal Democrat approach of never committing to anything. [Interruption.] I look forward to hearing more about that.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

The hon. Gentleman talks about the economic benefits of the deal and the value of relations with Saudi Arabia. The Solicitor-General mentioned part of article 5 of the OECD convention on bribery, but is the hon. Gentleman aware that the rest of it reads:

"Investigation and prosecution of the bribery... shall not be influenced by considerations of national economic interest" or

"the potential effect upon relations with another state"?

Those considerations are not material—or they should not be material—to the dropping of the investigation.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

In one way, that could not have been better said. The hon. Gentleman is absolutely right, but that raises the question why the hon. Member for Twickenham started what I had hoped would be a focused debate on the discontinuance of the investigation with a peroration which included a number of completely and utterly barmy assertions to the effect that the agreement was, in fact, economically disadvantageous in the first place. Given that the hon. Member for Twickenham raised the matter, it is incumbent on other Members to debate it. It seems to be part of a total picture that the hon. Gentleman has tried to convey that I find slightly unreal.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

May I repeat my point? If the documents on the 1980s were available, we would all be able to gain a better informed view of the economic and other benefits, but is the hon. Gentleman aware that the Treasury, the Bank of England, the Export Credits Guarantee Department and the Department responsible for energy at that time—and specifically, the hon. Gentleman's former colleague, the then Mr. John MacGregor—all took the view that the agreement was highly disadvantageous?

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

Yes, I understand that, which is why I intervened to make the point that, as so often happens in the House, when decisions are made, some people say that they are a good idea and others say that they are a bad idea. However, we are now 20 years down the road, and my impression was that the hon. Gentleman was unable to come to the conclusion that this had been a financially disadvantageous package. That rather undermines the reasons for raising the issue in the first place. It rather coloured my view of the judgments that he went on to exercise on other matters.

To return to the point raised by Martin Horwood, I entirely accept that, on the question of the discontinuance of the SFO investigation, the economic advantage to this country cannot come into play. He was quite right about that. I want to turn to that issue now. When we remove the froth around it that I have tried to identify, we see that it is the main issue that the hon. Member for Twickenham wishes to debate. It is worthy of debate and of great importance. I had had very little reason to focus on the issue until shortly before the Attorney-General made his announcement in the other place and the Solicitor-General made the announcement on behalf of the Government here.

When someone tells me that they are going to announce the discontinuance of an SFO investigation, it seems incumbent on me to focus on the issues involved and to do the best I can to analyse whether the Attorney-General and the Solicitor-General are trying to pull the wool over Parliament's eyes, whether it is an attempt at a sordid deception of the House, whether it is another example of the perpetration of systematic deceit of a serious nature from within the Government, or whether in fact the argument might have some force.

I accept that we do not know all the facts of the case. That is a very real issue, and one reason why it is legitimate to debate the matter. The hon. Member for Twickenham said that, as far as he could tell, payments made by BAE Systems to third parties under the al-Yamamah contract had been open and made with the knowledge of the Saudi authorities. All my inquiries have also suggested that that is the case. That raises some interesting legal issues.

The hon. Gentleman may properly argue that the complex nature of the al-Yamamah contract and the relationships between the Governments were of a kind that we should not have embarked on—or continued to pursue, as this Government have done. However, it is becoming clear to my mind—I am trying to apply a lawyer's mind to the matter—that there is a considerable difficulty, because there does not appear to have been a criminal offence committed by anyone.

There might be other facts available to the SFO. Other issues might have coloured its decisions. Perhaps secret payments were made that we do not know about. However, the basic ingredients of corruption—hon. Members may go off and look this up in the book—involve someone paying secret commissions to the agent of the party with whom he is dealing, to encourage the agent to favour him with a continuing contract on behalf of the principal. That is the foundation of the offence. At times in the House we have raised—and will, no doubt, continue to raise—serious anxieties that certain companies might be doing that. Reference was made to France, where, I regret to say, there has been ample evidence that French companies have been corrupting the officials of foreign Governments on a serial basis for many years. That might be done in this country as well, in an international setting. I suspect that it was certainly done before the passing of the Anti-terrorism, Crime and Security Act 2001, and if it is still being done, it is a serious criminal offence, even if it is done abroad.

When I was confronted with this issue, I went off to do a bit of research and make some inquiries. It seemed to me that the Attorney-General might have a point when he said that he thought that the inquiry might be going nowhere. On the face of it, there can be no prosecution if there was an agreement to give commission payments to certain agents of the Saudi Government, with the full knowledge of the Saudi Government, as part of the overall contractual arrangements. Reprehensible as it may be that that would enable certain people to go on shopping sprees around London and to take planes back to their country, and that some individuals in Saudi Arabia have Swiss bank accounts, none of those things amounts to the commission of a criminal offence. The Attorney-General and the other Law Officers have to focus on whether a criminal offence has been committed, and whether continuing an inquiry would be productive.

Photo of Tobias Ellwood Tobias Ellwood Opposition Whip (Commons)

It is useful to place this matter in context. The al-Yamamah deal is worth £40 billion, and we are talking about moneys that have moved into various accounts to the value of about £50 million—the figures vary—which is less than 0.1 per cent. Does my hon. Friend agree that that is a small amount of money in comparison with the deal as a whole?

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

My hon. Friend makes a legitimate point. I simply have not the slightest idea how much money has been paid as side commission, so I do not feel able to comment further on the matter. All that I can say is that, on the question of whether it is a criminal offence to pay a substantial sum of money—whether a tiny or a large percentage of the total involved—to a third party as part of an agreement, with the knowledge of the principal, I find it difficult to see how such an offence has been committed.

It was asked whether there might have been a failure to disclose these payments in accounts. I do not know the answer to that, but it would be a separate issue to that of corruption. I am not in a position to make a judgment on that. On the main issue, however, the Attorney-General had a legitimate point to make—unless of course he is deceiving Parliament.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

Does the shadow Attorney-General acknowledge that the decision was not made on the basis that there might not be enough evidence to stack up in order to bring charges? It was made on the other ground on which prosecution investigations can be discontinued. We shall never know the answer unless we see the papers and the trail of discovery. The SFO has been charged to do this kind of work since it was set up in 1988, and its director has been in post for many years. Is it really credible that he would have committed himself and his staff to an investigation for almost three years if the basis of the crime did not exist in the first place?

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

The hon. Gentleman raises an important point. This is one of the reasons why this matter should be debated. I fully accept that that is a legitimate issue to raise. It is, however, possible to embark on an investigation without being clear about the full facts, and for those facts to emerge only during the course of the investigation. That is not unusual. Heaven knows, I have been involved often enough in prosecuting—and sometimes defending—individuals when the penny has dropped only on the first day of the trial that there is no case against the individual concerned. Indeed, I can think of one case—in which I was counsel for the defence—in which the prosecution ended up with egg all over its face because it was only at the close of the prosecution case that the penny dropped that there was no case against the defendant. A great deal of public money had been incurred by that stage.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I have listened with care to the hon. Gentleman's argument. He has raised the issue of the law of agency, which was of serious concern to the Attorney-General and me while we were looking at this matter. I can confirm that the law of agency was also one of the issues that the director of the SFO was looking at, along with the question of how we would be able to ask the appropriate questions, in view of the difficult circumstances relating to the Saudi Government. That is a significant problem in relation to this matter. On the issue of agency and whether there would have been a case, the hon. Gentleman raises some important points—indeed, points that the Attorney-General and I felt caused great concern, particularly if they meant that there would have to be 18 months of investigation before we could even come to the conclusion that there was no case to answer.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I am grateful to the Solicitor-General for his comments, which remind me that I have not dealt with the first, and equally important, point raised by Simon Hughes, although I was in a sense coming to it.

I am not sure that I entirely agree with the hon. Gentleman—the Solicitor-General may be able to correct me—on the concerns that weighed on the mind of the Attorney-General and the director of the Serious Fraud Office when they looked into the matter. After the briefing that I attended, at which the hon. Gentleman was present, I was left with the impression that the public interest issue was viewed in light of uncertainties about whether a prosecution could be successful. It seems perfectly proper to weigh those two considerations in the same balance, and for one to have an impact on the other. I also had the impression that it was not simply the public interest test that led the director of the Serious Fraud Office, having discussed the matter with the Attorney-General, to decide to discontinue the investigation. I saw the two factors as running together. I am sure that the Solicitor-General will correct me if I am wrong.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I have just one other point to make, because I do not want there to be disagreement where there need not be. The hon. Gentleman and I were indeed both at the meeting with the Solicitor-General, and I am clear about the fact that both considerations were in play. The questions on the Law Officers' minds were how much evidence there was, and what the national interest was. In the end, it was national interest that pulled the plug on the investigation, because in any event, irrespective of the Attorney-General's view of where the investigation was going, they took the decision that they deemed necessary at the time. The hon. Gentleman and I are both clear that that was the decisive cause for the decision, but whether there would have been sufficient evidence to ensure a 50 per cent. chance of conviction is an open question.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I certainly do not wish to have an unnecessary disagreement with the hon. Gentleman, and it is quite clear that there were real issues of public interest, in terms of national security, that weighed heavily on the Attorney-General. Indeed, the Attorney-General made it quite clear that, before making his decision, he called in the papers—he described graphically how he pored over them in his office for three days, reviewing the matter—and had discussions with the intelligence services, the Prime Minister, the Foreign Secretary, I think, and the British ambassador in Riyadh about the possible impact on national security, and therefore on the public interest. Under our constitution, the Attorney-General is the guardian of the public interest consideration in matters of prosecution.

That brings me to a second issue: in describing the Attorney-General's reasoning, and when considering how he arrived at his view, one must ask whether he was being frivolous, or had gone on some bizarre frolic of his own, or was trying to deceive Parliament. I have to say to the hon. Member for North Southwark and Bermondsey that we should bear in mind the current state of the middle east, the importance of the state of our relations with Saudi Arabia, the current terrorist threat, the argument that close relations with the Saudi Government are important, and the fact that it appeared that the Saudi Government found the investigation irritating, to put it mildly—and we would almost certainly have needed their co-operation to bring the investigation to a satisfactory conclusion, because witnesses would have to be found in Saudi Arabia to establish the facts. All those factors make the Attorney-General's reasoning appear perfectly credible.

This is not a criticism of the Attorney-General, but I was left in no doubt that his intervention must have had a major bearing on the conclusion that the director of the Serious Fraud Office eventually reached; I have always assumed that that was the case. If I may say so to the Solicitor-General, I do not consider that in any way improper. Still, the Attorney-General is perfectly entitled to say that, at the end of the day, it was the director of the Serious Fraud Office who took the decision, but I do not think that the Government ever suggested that the Attorney-General did not hold widespread consultation with all interested parties—quite legitimately, under the Shawcross rules—before arriving at the decision, or that he did not discuss the matter with the director of the Serious Fraud Office, who then went off and made his decision.

Photo of Malcolm Rifkind Malcolm Rifkind Conservative, Kensington and Chelsea

I do not disagree with what my hon. Friend says, but perhaps he does not go far enough. If the ultimate reason for the decision was national security, it would be for neither the SFO nor the Attorney-General but the Prime Minister to express a view on the matter. It would be the Attorney-General, reflecting the view of the Prime Minister, who would then have discussions with the SFO.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I am sure that my right hon. and learned Friend is perfectly right. I am not usually fair to the Prime Minister—I have no desire to be—but when he pointed out, quite openly, that he had had major involvement in the matter, it did not strike me as improper, although the fact remains that it is the Attorney-General who is the guardian of the public interest under our prosecution system. It is for the Attorney-General to make decisions, although it is also possible for those within prosecution services to make the decisions first, before they refer them to him. As I understand it, that is what the director of the Serious Fraud Office chose to do.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I give way to the hon. Gentleman, but then I will make progress.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I am grateful to the hon. Gentleman for showing his usual generosity. In reply to an intervention by Sir Malcolm Rifkind, Dr. Cable said that, in principle, one should be able to take into account national security, although not in this case. Does Mr. Grieve share my surprise about that?

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

Yes, I do, and I am trying to explain to the House why, when I considered the matter, I came to the conclusion that there was absolutely no evidential basis for saying that the Attorney-General's decision was wrong, however convenient it might be to do so from the point of view of narrow party political advantage. There was nothing whatever to support that suggestion. I do not want to take up much more of the House's time, but the basic premise on which the hon. Member for Twickenham opened the debate is fundamentally flawed. He may argue against the system, and he might have argued against the al-Yamamah agreement in principle when it started, but if we focus on the narrow issue, the Attorney-General seems to have acted properly.

In conclusion, as a result of what happened, it has been suggested that we have the wrong prosecution system in this country. It has been suggested that we should do as the Irish have done, and make the Director of Public Prosecutions and the head of the Serious Fraud Office utterly independent of Government, using a system similar to that used for judicial appointments. Thereafter, the head of the Serious Fraud Office would make his own judgment about what was in the public interest, without reference to anybody else. I can see that that model has a superficial attraction, but the reality would be different to what is envisaged. First, I have serious doubts that such an independent prosecutor would have come to a different decision. Secondly, there would be the consequence that the matter would never have been debated. Debates such as today's would never happen again, in any circumstances, and there would be no parliamentary scrutiny. It is extraordinary to suggest that that should be the state of affairs.

That is why, with all its undoubted imperfections, the Attorney-General's slightly unhappy role, often described as a great burden, of reconciling such difficult issues will have to continue. I have not heard it said that public interest considerations should be abolished hereafter in deciding whether a person should be prosecuted. If we were to do that, there would be absurd consequences, and there would quickly be a clamour in the House about how wrong and stupid it was that some people were being prosecuted, because the consequences of bringing the prosecution were out of all proportion with the possibility of securing a conviction.

Photo of John Pugh John Pugh Shadow Minister (Health)

The hon. Gentleman mentioned parliamentary scrutiny, but he has so far not mentioned the Comptroller and Auditor General's report, and the request that it be laid before the House. That would go a long way towards clearing up the hon. Gentleman's doubts and uncertainties. Do Conservative Front Benchers support its being laid before the House?

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

The hon. Gentleman is right to raise that. It is the last point that I intended to deal with. I cannot go behind what was said by the then Robert Sheldon as Chairman of the Public Accounts Committee:

"I did an investigation and I find no evidence that— the MOD

"made improper payments. I have found no evidence of fraud or corruption. The deal ... complied with Treasury Approval and the rules of government accounting."

If that is the case, and on the basis that there were good reasons why the report should not have been issued back in 1992—and I do not see that it is very germane to the issue of the discontinuance of the prosecution under discussion—I find every reason to think that we must come up with some pretty compelling arguments if we wish to reverse the decision that was taken by Parliament then. I accept that it must be a legitimate subject of debate, but it is not one on which I feel confident to say that the then PAC Chairman was wrong in the judgment that he made.

I find the Liberal Democrat motion so woolly that it will not command the support of the Conservatives. Should the Government amendment be put to the vote, we will support it.

Photo of Roger Berry Roger Berry Labour, Kingswood 3:10 pm, 7th February 2007

It is a pleasure to take part in this important debate. As my hon. and learned Friend the Solicitor-General said, the Serious Fraud Office decision was a difficult decision and an uncomfortable one, so it is not surprising that some of us still have to be satisfied that it was the right decision. I say at the outset that I find it difficult to be persuaded that the decision by the SFO to suspend the investigation into BAE Systems and the al-Yamamah arms deal with Saudi Arabia was the right decision.

I shall make and have made no allegations of unlawful activity by any company, any Government or any individual in relation to the matter. I share the concerns of my hon. and learned Friend. In the debate today and in the debate on Tanzania last week, I heard it alleged that Governments, for example, have been involved in bribery, when there is not a shred of evidence for that. However, I am slightly amused when I hear it suggested that there has never, ever been any shred of evidence that bribery and corruption have been evident in any arms deal with Saudi Arabia.

I shall give one example. I saw "Newsnight" on 16 June 2006, when the former Defence Secretary, the noble Lord Gilmour, clearly stated that Britain bribed senior Saudi officials to secure arms contracts. I say to Members, do not believe me, believe The Daily Telegraph of 17 June last year, in which Lord Gilmour was quoted as saying:

"'You either got the business and bribed, or you didn't bribe and didn't get the business.'"

I am the first to say that that is not a reference about today or about recent years, but I find it strange that there are still those who deny that there has ever been anybody who has provided any significant evidence of bribery at any time in relation to al-Yamamah.

If a Defence Secretary cannot be trusted—[Hon. Members: "He was not a Defence Secretary."] May I quote again? The Daily Telegraph refers to him as

"a former Tory defence secretary".

I will take an intervention to correct The Daily Telegraph any time.

Photo of Michael Lord Michael Lord Second Deputy Chairman of Ways and Means

Order. The hon. Gentleman should be dealing with his speech for the time being.

Photo of Malcolm Rifkind Malcolm Rifkind Conservative, Kensington and Chelsea

Educating the hon. Gentleman must be in the interests of the House. Lord Gilmour was never Secretary of State for Defence. I think he was at one time shadow Secretary of State for Defence, but he never occupied the post itself.

Photo of Roger Berry Roger Berry Labour, Kingswood

I am grateful. I do not read The Daily Telegraph as often as perhaps I should. I probably now know why.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

Prior to 2001 it was not a criminal offence in this country to bribe foreign officials abroad. Applying a little common sense leaves little doubt that bribery must have been and was regularly used in relation to foreign contracts by British companies abroad. Not necessarily in relation to Saudi arms contracts but as a general rule, there is quite a lot of evidence to show that that was the case. I wanted to make that clear.

Photo of Roger Berry Roger Berry Labour, Kingswood

I am more delighted by the interventions as the debate goes on. I accept what the hon. Gentleman says entirely. It was not until 2002 that the present Government enacted legislation to make international bribery a criminal offence.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

As final clarification, may I cite a more reliable publication, "Dod"? Back in the early 1970s, Lord Gilmour was indeed in the Ministry of Defence and was a Minister.

Photo of Roger Berry Roger Berry Labour, Kingswood

I am delighted. I hope that that is the final intervention on the point. I did not see the wording of the motion until this morning, so I did not have time to do my own research. I apologise to the House.

Photo of Malcolm Rifkind Malcolm Rifkind Conservative, Kensington and Chelsea

I misled the hon. Gentleman. I have now had the opportunity to check. Lord Gilmour became briefly, for two or three months, Secretary of State for Defence at the end of Mr. Heath's Government, when Lord Carrington was moved to another post. I apologise to the hon. Gentleman. He was technically correct.

Photo of Roger Berry Roger Berry Labour, Kingswood

There is correct and incorrect. "Technically correct" is correct. I drew attention to Lord Gilmour's comments. Mr. Grieve confirmed what we all acknowledge, and he is right. Bribery in relation to trade deals or arms deals was not a criminal offence until 2002. There should therefore be no surprise when people point out that considerable bribery was going on before then.

Photo of Roger Berry Roger Berry Labour, Kingswood

I should like to make my final introductory point before I come to my concerns. We have little time.

I have said on countless occasions that the Government deserve enormous credit for two things in relation to the matters that are the subject of our debate. The first is controlling arms exports. Before 1997, the policy was arms to Iraq and the Scott inquiry. This Government provided the first and most comprehensive overhaul of the export control regime since 1939. They are now promoting internationally an arms trade treaty and leading on that, for which they deserve enormous credit.

Photo of Judy Mallaber Judy Mallaber Labour, Amber Valley

Will my hon. Friend comment on the excellent and positive briefing that we, as members of the Quadripartite Committee on Strategic Export Controls, which my hon. Friend chairs, both received this morning from Foreign Office officials on the work that they are doing to take forward our submission to the UN on developing an international arms trade treaty? Does he have any concerns about the impact that the questions raised today might have on that continuing and positive work, in which the Government have played a leading role?

Photo of Roger Berry Roger Berry Labour, Kingswood

I am grateful to my hon. Friend. I do have concerns, which I shall come to. The reason that I make the comments that I do about the SFO's decision is not that I am critical of the Government's overall policy on the arms trade and dealing with bribery and corruption, but that I genuinely find aspects of the decision puzzling and wish to share that with the House.

Reference has rightly been made to the OECD convention on combating bribery. Article 5, as has been pointed out, requires that the investigation and prosecution of bribery overseas shall not be influenced by

"the potential effect upon relations with another state".

It has not been mentioned that that is why the OECD is currently investigating that decision and has already taken evidence. I have seen the evidence that the Government have submitted to the OECD. In the near future—I assume by early March, although my hon. and learned Friend the Minister may be able to advise us on this point—there will be a written response from the OECD. I assume that the OECD makes such inquiries when there is a good reason do so and that it is not being frivolous.

The Government have referred to national security. I have no criticism if there is a demonstrable national security interest to such matters. Various Government statements, including the statement issued in December, have referred to the Government's foreign policy objectives in the middle east, which I happen passionately to share. If the purpose of the OECD convention is not to restrict the areas of national interest that signatories can take into account before pulling the plug on bribery investigations, then what is it? Although article 5 does not state this, I am prepared in principle to sign up to the hidden assumption that national security would be a reason in the public interest for ceasing to investigate further. However, if foreign policy objectives were meant to be included in the OECD convention, I am yet to find them.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

My hon. Friend has raised an important point. Merely causing problems in a relationship with another friendly state is not in itself sufficient justification for, as he described it, pulling the plug on an investigation. However, where national security is directly affected by that relationship, it was never the intention of this country when we signed up to that convention to say that we would not take into account the risk posed by terrorism to this country when considering whether to continue a case. Quite legitimately, the director of the SFO examined the convention and took the view that the full text of article 5, including the relationship with other countries, did not preclude his taking into account terrorism and the need to maintain relationships that enable our national security and international security to be properly protected. The Law Officers and, in making the decision itself, the director of the SFO acted entirely in accord with that convention.

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Original: "However, where national security is directly affected by that relationship, it was never the intention of this country when we signed up to that convention to say that we would not take into account the risk posed by terrorism to this country when considering whether to continue a case" Translation: We can stop a prosecution whenever we want by citing terrorism risks. Original: "The Law Officers and, in terms of making the decision itself, the director of the SFO acted entirely in accord with that convention." Translation: "When people say that 'nobody is above the...

Submitted by mick angel Continue reading

Photo of Roger Berry Roger Berry Labour, Kingswood

That longish intervention is clearly helpful to the debate. I await the outcome of the OECD investigation, and if the OECD expresses a contrary view, this House must re-examine the matter. I remain unconvinced that it is absolutely clear that the SFO has acted in accordance with the OECD convention—I am not a lawyer, but I have my doubts.

I find it difficult to accept the argument that Saudi Arabia—Andrew George has made this point—would not share intelligence to combat terrorism. Saudi Arabia has at least as big a stake in fighting terrorism as anyone else, although I do not expect my hon. and learned Friend the Minister to provide cast iron evidence to the House. I sincerely hope that in the not-too-distant future a Committee of this House will have the opportunity to scrutinise that argument a little more closely.

Like Dr. Cable, I am also cautious about the value of intelligence from Saudi Arabia. I am not picking on that country, because that is the nature of the case that we are considering. Year after year, the Government's human rights reports comment on infringements of human rights in Saudi Arabia—for example, torture and ill treatment in prison. I feel uncomfortable in assuming that information gathered by intelligence services will always be reliable in a society where, as the Government have pointed out, there is very limited press freedom, the rule of law is not as robust as in other countries and there is torture and maltreatment in prisons. The hon. Member for Twickenham mentioned the case of Sandy Mitchell; I will not repeat that.

I acknowledge that we are going back three years and accept that the Government will argue that there has been massive progress in the past two years. I hope that there has been, but I remain uncomfortable about accepting on face value intelligence from a country that has had, and does have, serious problems with human rights.

Photo of Kim Howells Kim Howells Minister of State (Middle East), Foreign & Commonwealth Office

My hon. Friend is right to raise this point. I assure him that the Government would certainly not accept evidence of any sort that might have been obtained through torture, and that any evidence that we receive is examined very carefully for all those variables—not only torture.

Photo of Roger Berry Roger Berry Labour, Kingswood

Of course, I accept my hon. Friend's assurance. I can, however, appreciate the enormous difficulties in distinguishing which sorts of information can be acceptable and which cannot.

Photo of Andrew George Andrew George Liberal Democrat, St Ives

The hon. Gentleman is making a very good case. Further to the plausibility of the argument that Saudi Arabia would not co-operate, does he share my concern that the declaration, "in the national security interest", can be used at any time in the future by any Government Department facing uncomfortable inquiries with regard to British interests, which would, merely by doing so, cloak itself in immunity from any further investigations without having to provide any evidence?

Photo of Roger Berry Roger Berry Labour, Kingswood

I am happy to accept the argument of a Government whom I support that the security interest was a serious consideration, not a way of getting round the OECD convention. However, I am terrified by the prospect of that convention—which I always gave the Government credit for signing, no doubt for the best of motives—being misinterpreted to the effect that it can be got round merely by saying "security interests" or "foreign policy objectives". I also fear that the fact that the case was suspended before it could be brought to a conclusion on its legal merits sends a message to companies that are trading with countries in which we have a "strategic interest" and might feel that it is easier to get away with bribery in those cases than in others.

Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Margaret Beckett, Secretary of State), Foreign & Commonwealth Office

Does my hon. Friend agree with Mr. Grieve that payments made over the table are not bribery, whereas payments made under the table are?

Photo of Roger Berry Roger Berry Labour, Kingswood

One learns something new every day. I did not know that I could walk over to my colleagues on the Front Bench, hand them a thousand quid, and say, "Give me a job in Government", and that Opposition Members would think that I was not attempting bribery. Now I know that that is what I should do.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

The point about bribery seems to be that if one is brazen about it, it is okay.

Much has been made of the assertions regarding national security, and I have to question where they have come from. Have the heads of MI5 and MI6 backed those assertions emanating from the Government?

Photo of Roger Berry Roger Berry Labour, Kingswood

The reason why I do not support an independent inquiry, as proposed in the motion, is that this involves issues of detail as to what influenced and brought about the SFO decision. That should be considered by the appropriate Committee of the House, which is how I would deal with it. Until we have a proper investigation, questions will remain unanswered.

My final point relates to the impact on British business of any perception that bribery and corruption might not be tackled rigorously. I chaired a Trade and Industry Committee Sub-Committee, which considered the Export Credits Guarantee Department and its anti-bribery procedures. One message that British business conveyed time and again was that it supported the Government's policies to tackle corruption and bribery and believed that such policies were good for British business, which would be far better placed to win orders internationally if it were seen to be clean and supportive of anti-bribery measures.

I hope that the outstanding concerns that many of us have about the SFO decision can be tackled, doubtless following the OECD's final determination on the matter. They need to be addressed. We cannot simply say that the decision was difficult and uncomfortable, without acknowledging that there are reasons for that feeling of discomfort. After a speech with more interventions than I can ever recall in my case, I am in a similar category.

Photo of Malcolm Rifkind Malcolm Rifkind Conservative, Kensington and Chelsea 3:30 pm, 7th February 2007

Although I disagree with Roger Berry, I must say, in the light of my intervention, that he made what was technically a very good speech.

I do not normally start with a presumption in favour of the Government, but I do so on this occasion, and nothing that Dr. Cable said has affected that. I accept that, on the face of it, the Government start from a bad position. We do not pay lip service to but genuinely believe in the rule of law, yet the Serious Fraud Office, either on its own initiative or through Government representations, which were undoubtedly made, decided to discontinue a serious inquiry that had been going on for a long time. That led to criticism from the OECD, and criticism from the South African President of double standards. Clearly, the position is embarrassing, and we would all have preferred to avoid it.

That is not good enough, however. We must consider whether the rule of law—technically applied to mean that, when one has evidence, one brings a prosecution against those deemed responsible—should always prevail or whether there can be circumstances, albeit rare, when that is not proper. It has already been said that, for many years, when deciding whether to bring a prosecution, it has been necessary to ask not only whether there is sufficient evidence but whether the public interest justifies it. In the debate in another place, my noble Friend Lord Mayhew, a former Attorney-General, referred to an occasion in Northern Ireland when he was involved in a decision not to go ahead with a prosecution because of the wider public interest.

We must bear it in mind that, when we talk about our commitment to the rule of law, it is not an end in itself. It is simply a crucial method of trying to achieve a decent and just society, in which people's rights are recognised and justice can be applied. It is not an end in itself. If there is a wider public interest, there is nothing improper about taking that into account.

The decision is not easy. It would be much more difficult to justify what has happened on the occasion that we are considering if an individual citizen's rights had been impeded. If, for example, someone is locked up for 90 days without trial, that is not easy to justify, even if there is a wider national interest, because a person's liberty has been removed. If someone is murdered or assaulted and, despite the availability of evidence, a prosecution is not initiated because of some wider public interest, that is disturbing because the decision impedes someone's rights.

That is not the position that we are considering, however. Rightly or wrongly, the issue at stake is not the individual's rights but those of society. No one disputes—indeed, the hon. Member for Twickenham agreed—that if there are legitimate issues of national security, it is right and proper for them occasionally to prevail over a decision to take a prosecution forward. The hon. Gentleman is nodding in agreement with my interpretation of his views. The question that must be addressed is: were there legitimate reasons of national security that justified the decision in this case? The honest answer is that none of us in the Chamber knows, as we are not privy to the most important intelligence information available. The Serious Fraud Office did not know. I suspect that the Attorney-General may not have known, except at second or third hand. The person who has the ultimate responsibility is the Prime Minister.

From my experience as Defence Secretary and Foreign Secretary, when I had access to intelligence information and had to deal with Saudi Arabia over the course of five years, I can say two things. First, I have no doubt that the kind of co-operation that Saudi Arabia is giving to the United Kingdom with regard to counter-terrorism measures is of enormous importance in enabling us to succeed in our objectives of dealing with terrorism. Secondly, I can comment on whether the Saudis were serious in their threats that that co-operation would cease if the inquiry continued.

Several hon. Members have said that it is absurd to argue that the Saudis would have discontinued their co-operation when their own regime is threatened by al-Qaeda. That is logically correct, but I was once told that logic was the art of going wrong with confidence, and I believe that that applies on this occasion. Anyone who understands the regime in force in Saudi Arabia knows that one is not dealing with a single head of state—like the Shah of Iran in his heyday—but with a royal family, a clan, who are intensely jealous of their privileges and determined to ensure that there will be no, as they would see it, unacceptable investigation of how they go about their lives.

From my experience with the Saudis, I have no doubt that they would almost certainly have carried out the threat, even if they were cutting off their nose to spite their face. That was the dilemma that the Government faced. The judgment was a difficult one, and the Prime Minister—who, I assume, ultimately gave the advice that had to be taken on board by the Attorney-General and the SFO—was right on this occasion.

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There's not one mention of the English people in Kensington & Chelsea in this absurd speech by a mentally deranged autocrat drunk on his own power. He has done nothing for the people of his own constituency - that I'm aware of - and should he have done anything worth note, than he should have told someone noteworthy about it. The sooner he and the system he purports to represent are dispatched to history, the sooner ordinary English people can have a say in their own destiny through the introduction of secure Electronic Democracy.

Submitted by Adrian Thurston

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

The right hon. and learned Gentleman describes the investigation as perhaps unacceptable to the Saudi royal family. Would it have been unacceptable to him?

Photo of Malcolm Rifkind Malcolm Rifkind Conservative, Kensington and Chelsea

I have no personal reason to wish to see such an examination continue. My interest and, I should imagine, that of all hon. Members, is our national security, and whether that would have been impeded by a loss of Saudi co-operation on one of the most crucial threats to the well-being of this country. If the evidence available to the Prime Minister indicated that that would have been so—I see no reason to doubt that evidence in such a case—the proper conclusion was reached.

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I am unsure as to why Malcolm Rifkind should think that the criminal investigation of a bribe for a £40billion project should be so offensive to the British people or their corrupt assembly as a whole. Surely the British are by nature monetrists and also mostly "foreigners" and so consequently...

Submitted by Adrian Thurston Continue reading

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

Does the right hon. and learned Gentleman accept that the constitutional principle on which we have all worked, which was set out by Hartley Shawcross when he was Attorney-General, is that Prime Ministers, and other Ministers, are entitled and indeed invited to make representations, but Law Officers ultimately have a separate decision to make and are entitled to come to a different view of what the public interest is?

Photo of Malcolm Rifkind Malcolm Rifkind Conservative, Kensington and Chelsea

I understand what the hon. Gentleman is saying, but I do not agree with the thrust of his remarks, because it is well accepted that one of the factors that Law Officers must take into account is the national interest. The greatest national interest of all is national security, and the member of the Government who has overall responsibility for national security is the Prime Minister. In practice, it is difficult if not impossible for an Attorney-General to say, "I disagree with the Prime Minister as to the national security requirements of this country." He does not have such expertise, nor should he be expected to have it.

Photo of Malcolm Rifkind Malcolm Rifkind Conservative, Kensington and Chelsea

I am conscious of the limited time, and I hope that I will be forgiven for not giving way again.

On this occasion, I accept the Prime Minister's judgment. However, we should not need to have this debate. We should have a society in which the view of the Prime Minister and the Law Officers on such issues is automatically accepted. It is one of the legacies of Iraq, the decisions taken at that time and the whole atmosphere created by the judgments and misjudgments made that even when the Prime Minister and Law Officers assure the House that national security would have been threatened, many hon. Members find it almost impossible to accept their good faith. That is perhaps the real tragedy of the issue that we are discussing today.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs) 3:39 pm, 7th February 2007

I am conscious of the time, so I shall try to be brief.

This is a vital debate. The Government argued quite aggressively that there was a national interest in the case being dropped, and even that such a decision was compatible with the OECD convention on combating bribery of foreign public officials in international business transactions. Those are highly debatable points, and I am inclined to agree with Roger Berry in disputing them, but mine is a different argument. My argument is that there were simple and vital reasons to continue the investigation, and that they were not considered.

On 24 January, I questioned the Secretary of State for International Development. In answering, he revealed—astonishingly—that he had not been consulted by the Attorney-General over the dropping of the BAE Systems case. He rather disingenuously suggested that that was because the only material conversation was taking place between the Attorney-General and the Serious Fraud Office, but of course that was not the case. The Attorney-General sought the advice of the Foreign Secretary and the Secretary of State for Defence, and also the views of the Prime Minister. In fact, the Prime Minister was extremely generous with his views: the answer to a question from my hon. Friend Susan Kramer revealed that he had "updated" advice in September 2006 and again in December 2006. He had given his views on three occasions.

The one Minister who was not consulted was the very Minister who was charged with pursuing Government policy on corruption and bribery in international corporate deals. Let me, for a moment, praise Government policy, because Government policy on bribery and corruption in this particular respect is very good on paper. Let me give the House chapter and verse. On 26 October, the Secretary of State for International Development set out the reasons for the anti-corruption plan very eloquently. He said:

"Bad governance can be caused or made worse by the actions of rich countries and their companies. For every bribe taken, there has to be a bribe giver".

He said:

"we can and must do more."

He said:

"Our new anti-corruption action plan will help us to do that by investigating and prosecuting bribery cases".—[ Hansard, 26 October 2006; Vol. 450, c. 1739.]

In other words, there is a virtue in prosecuting bribery cases even when it is otherwise inconvenient to do so. They should be pursued, and there is a national interest in pursuing them.

Let us examine the detail of the United Kingdom action plan to combat international corruption. It states that we should

"Fully implement the new OECD 'action statement' on export credits".

That document—there is quite a paper trail here—talks of

"Informing exporters and, where appropriate, applicants, requesting support about the legal consequences of bribery in international business transactions".

That is rather difficult to do. It is rather difficult to demonstrate the consequences of bribery if the consequence is nothing when a case is dropped. Of course, we cannot and would not want to assert that there was definitely bribery in the precise case involving BAE Systems that was investigated by the Serious Fraud Office, but that cannot be demonstrated because the case was not seen through to its end.

The second paragraph of the action plan talks of strengthening

"the UK's implementation of the OECD Guidelines for Multinational Enterprises."

According to the relevant document, enterprises should

"Enhance the transparency of their"

—companies'—

"activities in the fight against bribery and extortion."

What better way to demonstrate transparency than by seeing such investigations through to their logical conclusion? We would all hope that, in the case of BAE Systems, its innocence would be demonstrated.

The OECD document goes on to explain why this is so important. It says:

"Bribery and corruption are not only damaging to democratic institutes and the governance of corporations, but they also impede efforts to reduce poverty. In particular, the diversion of funds through corrupt practices undermines attempts by citizens to achieve higher levels of economic, social and environmental welfare. Enterprises have an important role to play in combating these practices."

If Mr. Grieve is looking for an economic argument for continuing investigations of this kind, that is it.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

The hon. Gentleman makes an important point, but another point concerns the definition of what constitutes corruption. There is an argument that we badly need a new corruption Act, and that point has been made on many occasions, but unless or until we have a new corruption Act we are left with the existing legislation. As I have said, given the scope of the existing legislation I am left with the impression that the OECD is likely to have some difficulty in concluding that what was taking place in relation to Saudi Arabia constituted an offence.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I think the hon. Gentleman is stepping on the SFO's territory here. I do not think that was actually the reason why the case was dropped. What I have said about the impact on overseas development and the overall economic welfare of our relations with many other nations begins to illustrate the scale of the damage done by the Government's actions in this case. Not only have we damaged the well deserved reputation of British companies for transparency and honesty, not only have we appeared to kowtow before an undemocratic monarchy with an abysmal human rights record, not only have we damaged our own credibility in the OECD to the detriment of other negotiations within that organisation, and not only have we damaged the credibility of the SFO by putting it under exactly the kind of political pressure that is expressly forbidden by article 5 of the OECD convention, but we have damaged the very work that DFID Ministers, staff and partners around the world have laboured tirelessly to deliver.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

The hon. Gentleman is making some interesting points, and they are points that we had to consider in relation to the decision made by the director of the SFO and the view taken of that by the Law Officers. We had to consider the impact that there might be on our international reputation and the burden we faced in seeking to pursue allegations—which is what they were—of corruption, as against what was on the other side of the scales, which was the legal requirement to consider the public interest and the national security of this country. I assure the hon. Gentleman that the issues he mentions were considered, but he is setting out only one side of the case in regard to them, whereas the problem was that there were other issues on the other side of the scales.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I am grateful for that reply, but I do not see any evidence that the issues were truly considered. The Minister responsible for pursuing the anti-corruption action plan was not even consulted, as he has clarified to the House. Therefore how on earth can the Government have considered fully the implications of that side of the public interest argument? That Minister has made the case powerfully in Parliament that, by seeming to hold back on the prosecution of bribery and corruption cases ourselves, we give permission to other companies and other countries to take a softer line too.

The arguments made by the Attorney-General in another place appear to be inhabiting an Alice in Wonderland world where people can contradict themselves within seconds. At one point he said that UK-Saudi security relations were an important factor, and he then said, in relation to obeying the OECD convention that prohibits taking into account relations with other states, that we did not do so—he used a phrase similar to that. I am amazed that anyone can contradict themselves within seconds in that way and expect no one to notice. Luckily, 130 campaign groups and charities around the world did notice, from India's Public Interest Research Centre to the Jordan Transparency Forum to our own branches of Amnesty International, Oxfam, Friends of the Earth and Transparency International. They all called on the UK Government to abide by their own policies and to reopen the investigation. The Liberal Democrats noticed, too, as have Members of all parties who share our concerns.

There might have been a national interest consideration that weighed in favour of dropping the case, but there was also a considerable and vital national and international interest in continuing it and, shamefully, I do not think that that was even considered.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats 3:48 pm, 7th February 2007

The decision to call this debate has proved worth while. Mr. Grieve rightly confirmed that the subjects it addresses are worth debating. I will seek to deal with comments made by colleagues in the course of the debate and with other matters that my hon. Friend Dr. Cable was criticised for not dealing with, but which he did not deal with because we have adopted a double-handed approach with one Member opening and another winding up so we shared out the work between us.

I want to try to establish the reason why we say that the matter under discussion is of important public interest for various reasons. As has been agreed, the matter dates back to a contract first entered into in the mid-1980s. It was a significant contract that turned out to be worth a significant amount of money. My hon. Friend the Member for Twickenham made the case that whether it is in the long-term interests of this country that that deal between BAE Systems and the Saudi authorities was entered into, and then continued as it has been since, was controversial at the time and, like the decisions taken recently, can only be viewed in the round. Of course a contract for jobs in this country in an industry in which we have expertise involving a large employer with a good reputation is potentially beneficial—of course a contract with an ally, whatever its failings, is potentially beneficial. However, from the beginning there was independent evidence—the Bank of England is as good a witness to call as any—that this was not an unqualified bonus: that it was not thought to be an unarguably beneficial contract. At the end of this exercise, only time will tell and only full information being revealed will show us whether the national interest has, on balance, been served by the contract, which began back in the 1980s.

Nobody on the Liberal Democrat Benches has ever argued that—where we can do so legitimately and properly, at home or abroad—we should not seek work and contracts for British companies. It is not part of our case that we should not have a defence industry, and we have argued in support of strengthening our conventional defence, not weakening it. Nobody has argued that we should not have dealings with other countries. Our argument is about how matters have progressed, what the public know and whether, in the end, those involved have stayed on the right side of the law.

It was not Liberal Democrats who—to use the Solicitor-General's phrase—started a campaign of innuendo. Allegations surfaced back in the 1980s, which is why the National Audit Office, as the watchdog of public finance, held an inquiry on Parliament's behalf and brought its report to the Public Accounts Committee. Yes, it was a long time ago, and I accept that it is a decision for Parliament, not the Government, as to whether an NAO report is published. However, it is important to publish the report because, although it may or may not tell us something about the early history of these dealings, this is the only time in the NAO's history that such a report has not been published. The current Chairman of the Public Accounts Committee said in an intervention that he, having been briefed, believes that nothing suggested that there was corruption or that offences were committed by the Ministry of Defence. If so, that is all the more reason why the report should be released.

Our motion calls for the report to be released, and if it is passed, that will be a clear indication that it should be released. I hope that the Conservatives will reflect on the fact that, if they vote against the motion, which we will certainly put to the vote, they will be voting against, among other things, the proposal that the NAO report, which remains secret, should come out into the open.

The Serious Fraud Office, having been set up in 1988, started its investigations. There was a preliminary investigation in 2001, and questions and early-day motions were tabled in this House not only by Liberal Democrats, but by colleagues on the Government side who expressed concern about this issue. It was out in the open, and questions were regularly asked of Ministers. In the end, the SFO started a serious investigation, as it should. That is what it is there for, and what Parliament wanted it to do.

Colleagues are of course right to say that until 2001, when we passed new legislation on this issue, it was much more difficult to deal with bribery and corruption—to deal with the paying of money outside a contract to achieve a benefit that one would not otherwise get without that wrongful payment, which is a simple principle to understand. So the 2001 legislation that the Labour Government introduced was welcome, and a new regime—a new backcloth—became part of the landscape from then on.

I share the view of the hon. Member for Beaconsfield that it is a great frustration to many that it is, however, now nine years since a new bribery Bill was contemplated. I am not blaming the Government entirely for that. I know what happened—such a Bill came up for scrutiny, and the pre-legislative scrutiny Committee rejected the idea of proceeding with it. There has since been a Home Office consultation paper, but our approach to this issue will not appear serious to this country, let alone to the rest of the world, until the other part of the legislative package—serious anti-bribery legislation—is in place. I call on the Government and the Minister for the Middle East to indicate that they will turn the planned anti-bribery Bill into a reality, so that we can have a new anti-bribery Act.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I agree with that and of course, such a Bill would allow us to have a sensible debate about definitions. As the hon. Gentleman knows, being a lawyer, definitions are rather important in this regard, particularly a definition of what constitutes, or might not constitute, a criminal offence. That is why it is so important that we examine this issue.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I agree entirely. I can do no more than say that the Liberal Democrats want that to happen soon.

Next came the reports in early December that the Saudi Arabians were thinking of taking a defence order from this country and giving it to France. Within days of that report—a fortnight at most—the Attorney-General made a statement to the House of Lords and the Solicitor-General made one to this House, late on a Thursday evening, to inform us that the decision had been taken that the SFO investigation should be discontinued. I respect the fact that the Solicitor-General said that he could not give me a full answer to my question, but he appears to have confirmed this afternoon that the discussion about whether lesser charges should be brought—the Attorney-General confirmed that it happened—against lesser individuals in return for an agreement that the people from BAE Systems would plead guilty also happened in December last year. Suddenly, as bank accounts became accessible in Switzerland and charges were being contemplated in London, there was huge activity in Riyadh and elsewhere that quickly resulted in the announcement that the investigation would be discontinued.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

Is not it strange that an inquiry that rumbled on for two years was discontinued just as all the factors that the hon. Gentleman mentions came to a head? The inquiry was ended a matter of days later, which undermines the whole national security argument that the Government have advanced.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I shall come to the issue of national security, because in the end it clearly determined the decision. However, I first wish to take the series of events to its conclusion. The statements were made in both Houses on a Thursday evening. The following day the Prime Minister was asked about the decision to discontinue the prosecution. Any normal reading of what he said makes it clear that it was his call that the proceedings were discontinued.

Since those few days in December, what troubles many people is that the argument for the discontinuation of the prosecution appears to have shifted, depending on who was explaining the reasons. For example, the Attorney-General has said both privately and publicly that there were two factors in his mind and that of the director of the Serious Fraud Office. The same two factors are involved in the decision on any prosecution. The first is whether it has a better than 50 per cent. chance of success and the second is whether it is in the public interest. Sir Malcolm Rifkind alluded to different types of prosecution, but the same two considerations apply equally every day, whether on decisions to prosecute old ladies who take things from supermarkets or on huge international contracts.

One of the reasons given on 14 and 15 December, which later appeared to be less secure, was that the director of the Serious Fraud Office thought that there was no more mileage in the prosecution. However, we know that he thought that further investigation might have led somewhere because he confirmed it a day or two later, and he had a difference of view with the Attorney-General. The Attorney-General took a different view and said so. His view was that it was unlikely that even further months of investigation would lead to a successful conclusion.

The security and intelligence services were also prayed in aid. It is still not clear what they said to Ministers, to the ambassador, to the director or to Law Officers. When the Attorney-General was questioned about that in the other place, in the debate initiated by Baroness Williams last week—it was a positive and engaged debate in which many of my colleagues took part—he said:

"I need to deal with one or two matters specifically. First, the position of SIS, the secret intelligence agency was raised ... SIS has made it clear publicly that it shared the concerns of others in government over the possible consequences for the public interest of the SFO investigation."

I will not read the whole paragraph into the record, but hon. Members can check that I am not misrepresenting by omission. However, the Attorney-General went on to say:

"As I said on 18 January, before the SFO decision was taken, I discussed the matter directly with the chief of SIS. The SIS has authorised me to say that it is clear about the importance of the Saudi counterterrorist effort to the UK."

No one can argue with that: of course a relationship with an ally to deal with terrorism is valuable. The Attorney-General went on to say that the view of the SIS was

"that it would not be possible to replicate the level of counter-terrorism effort that had been achieved with the Saudis on UK/Saudi aspects of the problem if it were necessary to work at one remove, via the USA, for example."— Hansard, House of Lords, 1 February 2007; Vol. 689, c. 379.]

We accept that too, but it is at least likely that the intelligence-sharing exercise by the UK Government and their agencies and the Saudi Government and their agencies is as valuable to Saudi Arabia as it is to us. Given that al-Qaeda's prime objective is to destroy the house of Saud, which it believes has betrayed and corrupted the Islamic tradition, Saudi Arabia has a clear interest in making sure that it gets the intelligence that the UK, as a huge and effective centre for intelligence, acquires.

There is no dispute about what the Attorney-General quotes the director of the SIS as saying. What has never been clear is that the director of the SIS gave a warning that caused the decision not to pursue the investigation to be taken.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

The SIS is happy for me to tell the House that it considered that there would be a risk to the UK's national security interests if the al-Yamamah investigation were pursued. It had been informed of a threat to curtail co-operation directly.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I understand that, and do not dissent. Of course I accept what the Solicitor-General says and what he has been told. The question that exercises us is as follows: if the Prime Minister and the Defence and Foreign Secretaries say, on advice, that a case poses a risk to our national security, must that automatically be something with which the Attorney-General cannot disagree? I put that point to the right hon. and learned Member for Kensington and Chelsea, who was both Defence Secretary and Foreign Secretary.

The tradition has always been that Law Officers give advice independent from the Government. We believe that the public interest of the UK is not confined to questions about whether a case might pose a risk to our relations with Saudi Arabia. It also has to do with the risk that corruption poses to the wider interests of our commercial reputation around the world. It is in the public interest to prevent that, and that is why we want to ensure that Law Officers' decisions are guided by the balance of all our interests.

However, we are not persuaded by the evidence that we have seen so far that the balance of considerations in this case was appropriate. Every time that the Prime Minister spoke, he appeared to add in questions of jobs and relations with other states—the two things that the OECD convention makes it clear cannot be considered in that context.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I may regret saying this, as I am sure that it will produce a great deal of comment, but the hon. Gentleman is right to say that the Law Officers and the director of the SFO have to make independent judgments. He is aware of the views of my right hon. Friend the Prime Minister, because they have been publicly expressed. He is also aware that there were a number of what are called Shawcross exercises, which are perfectly proper. He is aware too of the nature of the Prime Minister's response on those occasions, and of their dates. He is, therefore, aware that the director of the SFO and the Law Officers took a view at certain points that the investigation should continue. However, there came a point—in December last year—when the view was taken that it would take 18 months to reach a decision about whether a prosecution could be brought. That 18 months of further investigation had to be weighed in the balance with national security issues, so the independence of the Law Officers and the director of the SFO is clearly demonstrated in the sequence of events relating to those Shawcross exercises.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I completely understand that argument, but it would have been perfectly proper for Law Officers to respond to the Prime Minister, and through him to others involved in the investigation, including BAE and the Saudi Arabians, that although they understood that it was in the interests of those people to discontinue, it was in the greater public interest to see the investigation through to its conclusion. The Law Officers could have said that they would allow the independent, non-political prosecuting authority to complete its work.

I share the Solicitor-General's sentiments about the director of the SFO, who is well respected. The director said:

"There is no guarantee that charges will be brought until you have completed the investigation."

We know that access to bank accounts had just been opened. We know from people who talked to my hon. Friend Norman Lamb that the police were on the trail. We know that the investigators felt they were getting somewhere, yet just at that moment the investigation was discontinued.

I realise that there was pressure from an important ally. There was also huge pressure from BAE, which from all the evidence—not least that cited by my hon. Friend the Member for Twickenham—is probably the most effective manufacturing lobbyist in the UK. That is not a criticism of the company; the Government have clearly been responsive to its lobbying. I accept that there was great pressure, but it was still possible for Law Officers to resist it and to say that the investigation should go on. The Attorney-General and the Solicitor-General are not obliged to agree with the director of the SFO—as they know; they could have taken a different decision. The interests of dealing with corruption are sufficiently important that the presumption should have been in favour of continuing the investigation.

My hon. Friend the Member for Twickenham and I cannot be absolutely certain whether our judgment is right, because we do not have all the information. That is why one of the things called for in our motion, and by my noble Friend Lord Goodhart in the other place last week, is an inquiry into what has happened thus far to bring it into the open. On 1 February, my noble Friend Lord Garden asked the Attorney-General whether we could see the correspondence and all communications. The Attorney-General said that he would go away and think about it—he did not say yes or no—so I repeat my noble Friend's request. Perhaps the Minister for the Middle East will answer when he responds to the debate. Will Law Officers and Ministers put into the public domain all the evidence—the communications, messages and advice—that led to the decision taken on 14 December and brought Law Officers to Parliament? Only then will we know whether there was a proper balance between the security interests, in terms of intelligence between the UK and Saudi Arabia, the non-consideration of things such as jobs and relationships with another country, which is not allowed under the OECD convention, and whether pursuing a bribery investigation at the highest publicly known level was in our national interest.

Two relevant Ministers appear not to have been consulted: the Secretary of State for Trade and Industry, although he clearly had an interest; and the Secretary of State for International Development, even though he was appointed by the Prime Minister in June last year to lead anti-corruption activity in Whitehall.

If we can see those papers and documents, we will know the answers to those questions. The Minister may say that there may be some confidential issues to do with national interests, and of course there may, but there are forums in this place for documents to be revealed. We have an Intelligence and Security Committee, which can meet in private and which is made up of representatives of Parliament. There are ways in which that inquiry can be carried out and we ask for that to happen.

We are clear that the matter raises the issue of the country's international reputation. It is not just us saying that, or voluntary organisations such as Transparency International and Campaign Against Arms Trade; it is organisations such as the OECD. The OECD is investigating what has happened. That is not an invention. It is coming back and asking for information in March. It clearly stated:

"In the context of its regular exchange of views—" in December

"on recent developments, the Working Group engaged in discussions" and

"has serious concerns as to whether the decision was consistent with the OECD Anti-Bribery Convention and will discuss further the issue in March 2007."

For us, there are two substantive matters that remain to be dealt with. They go to the heart of confidence in the Government and in Law Officers, whoever they may be personally. There is the question of how we restore a reputation that, in the international community, has been spoilt by an illegal decision to go to war in Iraq nearly four years ago, following advice from Law Officers, which was not disclosed, and which involved some distortion of intelligence and a dossier that said one thing, but had no evidence to back it up. That advice was what gave the Prime Minister the justification for coming to Parliament to ask for the decision that Parliament took. This matter has again allowed Law Officers to be put in the position of taking a controversial decision that is not supported by the evidence. The problem for Law Officers, whoever they may be, is if they now think that they will have credibility if they are confronted with a Crown Prosecution Service file saying that they will have to consider what to do about cash for peerages. I fear that the Solicitor-General must be absolutely clear: there will not be any credibility.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

The hon. Gentleman has just said that Law Officers made a decision. In fact, it was the director of the Serious Fraud Office who made it, but we concurred with it. The hon. Gentleman said that the decision was made without evidence, but, on the contrary, we have been at pains to explain what that evidence was and that we did in fact, at least as far as the Law Officers were concerned, speak to senior members of the intelligence community and undertake a Shawcross exercise. We made it clear in all our statements that there was evidence before us, and, indeed, the director of the Serious Fraud Office had evidence from the Shawcross exercise before him. I entirely dispute the hon. Gentleman's claim that the decision was made without evidence. It was made after great and careful consideration.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I want to conclude, because we are keen to hear the response from the Minister for the Middle East. What have we got? Where are we in politics in Britain on this issue today? We have a Serious Fraud Office that has suffered from a loss of morale and self-confidence. We have an incomplete investigation, which was called off when we knew people were getting hot on the trail.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I am not going to give way.

We had, by the Attorney-General's own admission, consideration given to bringing forward lesser charges in return for a plea bargain. We have inconsistent explanations of whose decision it really was to discontinue the investigation. We have the only example in the history of the National Audit Office of a report not being published. We have had a severe blow to the credibility of the United Kingdom as a country committed to leading the international fight against corruption.

We on the Liberal Democrat Benches are clear what we should have and what we as a country would benefit from: a change in the decision not to publish the NAO report; an inquiry into the events leading up to the decision to discontinue the investigation into the BAE and Saudi Arabian arms deals; a tough new corruption Act that will give us much more effective tools for dealing with corruption at home and abroad; a change in the constitutional relationship between Law Officers, the Government and Parliament; and a restoration of the principle that the national interest of the UK is to defend, uphold and promote the rule of law above everything, so that we have a reputation for integrity at home and abroad. In the words of my noble Friend Lord Garden last week,

"is it not time to think again where the national interest lies? The national interest is to promote the rule of law and re-establish the United Kingdom's international reputation."—[ Hansard, House of Lords, 1 February 2007; Vol. 689, c. 364.]

That is why we tabled the motion and I hope that colleagues on both sides of the House will support us.

Photo of Kim Howells Kim Howells Minister of State (Middle East), Foreign & Commonwealth Office 4:15 pm, 7th February 2007

I am grateful to right hon. and hon. Members for their contributions to this afternoon's debate, which has been wide-ranging. I will certainly endeavour to answer the questions raised, but Simon Hughes spoke for 27 minutes and I have only about 15 left.

Photo of Kim Howells Kim Howells Minister of State (Middle East), Foreign & Commonwealth Office

Yes, it is.

As my hon. and learned Friend the Solicitor-General said in his opening statement and as the Attorney-General has stated on earlier occasions, the fundamental reason why the Serious Fraud Office discontinued the investigations into BAE Systems concerning payments in relation to the al-Yamamah contract with Saudi Arabia was to safeguard national and international security.

As both the Solicitor-General and the Attorney-General have also stated very clearly, UK co-operation with Saudi Arabia in the counter-terrorism field is of critical importance. Saudi Arabia is a source of highly valuable intelligence on al-Qaeda and other terrorist activity that represents a threat to the UK, to our citizens and to our armed forces. I would like to deal with that in more detail.

There is a high threat of terrorism in Saudi Arabia. Attacks have taken various forms. At their height in 2003 and 2004, they included kidnappings, large-scale truck bombings of residential compounds and Saudi Government offices, an attack on the US consulate in Jeddah, targeted shootings of individuals, small-scale car bombings, parcel bombings and the bombing of shopping areas. The Saudi security forces are working hard to maintain enhanced security measures and have succeeded in disrupting terrorist operations, killing and capturing terrorists, and seizing arms and vehicle bombs. I would like to remind the House that UK citizens have been the victims of several such terrorist incidents in the region, including the attack on a British school in the United Arab Emirates

Photo of Kim Howells Kim Howells Minister of State (Middle East), Foreign & Commonwealth Office

I do not have much time, I am afraid.

The siege in Riyadh and the fact that a number of those forming the 9/11 cell were Saudi citizens shows that this is not just a theoretical terrorist threat, but a real one. Our need for Saudi intelligence co-operation is beyond doubt.

Photo of John Pugh John Pugh Shadow Minister (Health)

The Minister has somehow missed out the fact that British citizens have been arrested for terrorism by the Saudi Government—wrongly, and despite the fact that they were in denial of any terrorism.

Photo of Kim Howells Kim Howells Minister of State (Middle East), Foreign & Commonwealth Office

I have met those gentlemen and I have every sympathy with their terrible experience. [Interruption.] It is all very well for a Scottish National Member to say that a bit of sympathy is not very helpful, but we tried very hard to help those gentlemen. People such as Mr. MacNeil should not speak in such an ignorant way about those situations. There has been too much flippancy about that.

I remind the House that Saudi Arabia has its own problems with al-Qaeda—there is no question about that—yet much of the money for al-Qaeda also comes from Saudi Arabia. In a recent visit to Waziristan, I was told by a member of the frontier corps that when they had examined bodies after a battle, they discovered that the military leader of an al-Qaeda detachment had been a Chechen, that a Turkoman was the armourer and the quartermaster, and that the money bags, as always with these detachments, was a Saudi. We ignore that fact at our peril. It is extremely important to recognise that we need the co-operation of the Saudis in these matters. It must be a very important consideration. The madrassahs that we are worried about in Pakistan are almost entirely funded by Saudi money. The Saudis are worried about that, President Musharraf is certainly worried about it, and I will be open with the House and say that we are very worried about it. To pretend that this is some kind of fringe consideration is nonsense.

The United Kingdom and the Kingdom of Saudi Arabia have a long history of friendship, understanding and co-operation. Saudi Arabia is a key ally in the region, and our co-operation covers regional and international issues, counter-terrorism, energy security, trade and investment.

Many questions have been raised today. I was glad to hear the hon. Member for North Southwark and Bermondsey. His contribution was a great deal more measured than that of Dr. Cable—it would have been difficult not to be. I sympathised with the hon. Member for North Southwark and Bermondsey when he asked why the National Audit Office report from the earlier period was not being published. He has been in the House for roughly the same length of time as I have. I thought that that report was produced before 1992. I remember being appointed to the Public Accounts Committee and feeling very chuffed about it. I turned up to my first sitting, only to be told by the Chairman, Sir Robert Sheldon, after he had welcomed me on to the Committee, that, like everyone else, I would have to leave the room because the only people who could read the report were the Comptroller and Auditor General, Sir John Bourn, who had written it, Sir Robert himself and the deputy Chairman.

We never saw that report again. I do not think that anyone has. There could be many reasons for that, and some of them might be to do with the report putting members of the security services in danger. I meet a lot of our brave security services personnel abroad, and I know that they are frequently in great danger. However, the hon. Gentleman has asked a perfectly reasonable question about the publication of the report, and I think that the Comptroller and Auditor General and the Public Accounts Committee ought to take his request seriously. The Committee has dedicated debates in the House, and this would be a good subject for such a debate.

At the time, we were told that the report would not be published—nobody tried to hide that fact—because there were 40,000 jobs riding on the al-Yamamah deal. That seemed to everyone a good reason not to publish it, at the time. I do not remember anyone—apart from my right hon. Friend Mr. Williams, who is always the star of the Public Accounts Committee—standing up in the House to say that it should be published and that we should know what was going on.

Photo of Kim Howells Kim Howells Minister of State (Middle East), Foreign & Commonwealth Office

No, I do not have time; the hon. Member for North Southwark and Bermondsey went on for 27 minutes.

I am absolutely sure that the hon. Member for North Southwark and Bermondsey took the right attitude in requesting the publication of that report, and in giving the reasons that he gave. The hon. Member for Twickenham, however, was a different matter. He made a real blooper when he said that, according to the OECD, Britain was the least compliant country with the convention, apart from Italy. No OECD statement to that effect has ever been made, and it is certainly not the case.

If we are talking about comparisons between the levels of bribery across major exporting countries, we need look no further than Transparency International's most recent "Bribe Payers Index", from autumn 2006, which states that UK-based companies are the least likely in the G7 countries to pay bribes in international business transactions. Next month, the United Kingdom will submit to the OECD an update of progress made on the overall implementation of the OECD convention. After discussions in Paris on 12 to 14 March, we plan to present a report on the subject to the House, so that Members can debate the matter for themselves.

None of that will count for the hon. Member for Twickenham and his friends, however. They have rarely let the facts get in the way of a good story, and they do not intend to start now. I can just picture how the froth of innuendo, rumour and scandal that we heard at the start of the debate was concocted. No one enjoys a good conspiracy theory better than a Liberal Democrat politician. That froth is the Liberal Democrats' favourite drink, and it is usually drunk through a straw and put to one side of the mouth while they swap fantasies and gossip with journalists who hang around the Security Service like ageing groupies around an adored pop star. That is the company that the Liberal Democrats hang out with, and we ought to remember it; that is who they deal with, and they never let the truth get in the way of a good story.

Of course, that froth quickly turns to mud, and some Liberal Democrats are rather fond of throwing it around. They do not care who it lands on, or whose reputation is stained, as long as they believe that they are getting votes from it. They do not care if it besmirches the country's reputation, either. That is why the hon. Member for Twickenham told us that piece of nonsense about the OECD report; he does not care. The Liberal Democrats do not care a bit if Britain is dragged into the mud by slurs. As long as they can bask among the mad ranks of their fellow conspiracy theorists, they will enjoy the slurs for as long as they last.

To compare this country's record unfavourably with those of some of our European neighbours, whose records are frankly appalling, is mad, bad, and another case of the self-flagellation so beloved by the liberal press and their spokesmen in this country. I spend a great deal of my time meeting the Governments of other countries, and I know of no other country, and no other major economy, that enjoys the United Kingdom's reputation for honesty and openness. The Liberal Democrats ought to remember that, instead of trying to drag the country through the mud whenever they open their mouths.

I cannot remember which Liberal Democrat Member asked a question on the subject, but I want to reinforce the point that it was the Anti-terrorism, Crime and Security Act 2001, which was implemented in 2002, that clarified the law and made it absolutely clear that the bribery of a foreign official was an offence. That is the UK's position, particularly with regard to the OECD. It could be dangerous if the Government appeared to agree that no prosecution could be brought prior to the introduction of the 2001 Act. That is a reasonable subject for debate, but the Government's record should not be dragged down by the kind of innuendo and absolute nonsense that we heard earlier.

Saudi Arabia and the United Kingdom have had a long relationship, and I remind hon. Members that at the heart of that relationship is our strong partnership on global counter-terrorism efforts. We enjoy a highly productive intelligence relationship with good operational results, and that should not be pooh-poohed. We work closely with a number of Saudi security organisations, and we believe that both sides gain from that co-operation. As my hon. and learned Friend the Solicitor-General repeated today, had the Serious Fraud Office investigation continued, there would have been a real danger that Saudi Arabia would have withdrawn its co-operation in that field, depriving the United Kingdom of a key partner and putting the lives of UK citizens at risk. It was on the basis of that risk that the director of the Serious Fraud Office concluded that the investigation should be halted.

Let me try to address claims that the SFO's decision proves that the Government are soft on corruption. As my hon. and learned Friend said at the start of the debate, the Government are strongly committed to tackling corruption, and we are doing much, much more on a range of aspects of fighting corruption. As he reminded us, the Government pioneered the extractive industries transparency initiative, which supports improved governance in resource-rich countries through the full publication and validation of company payments and Government revenues from oil, gas and mining. The remarkable progress made by the EITI in the past four years is widely acknowledged. That in itself could transform the lives of many people living in Africa and other continents. We have their lives in mind as we try to make sure that we tackle corruption everywhere, and that effort should not be besmirched by the kind of innuendo that we have heard today.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 74, Noes 309.

Division number 46

See full list of votes (From The Public Whip)

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.

Mr. deputy speaker forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House notes that the Serious Fraud Office's (SFO) decision to discontinue its investigation into BAE Systems plc and Saudi Arabia was taken independently by the Director of the SFO on grounds of national security in the public interest and in accordance with the Code for Crown Prosecutors; further notes that the SFO is vigorously pursuing a number of other lines of investigation in relation to BAE Systems plc; welcomes the steps being taken by the Government to tackle international corruption; and further welcomes the Government's commitment to compliance with the United Kingdom's obligation under the Organisation for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.