Alleged Overseas Corruption

Opposition Day — [17th allotted day] – in the House of Commons at 4:15 pm on 16th July 2007.

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Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons 4:15 pm, 16th July 2007

I inform the House that I have selected the amendment in the name of the Prime Minister.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer 4:18 pm, 16th July 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 into payments made to third parties in South Africa and other arms-related inquiries;
notes with concern the consequences for the role of the Attorney General of the decision to terminate the SFO investigation into BAE Systems plc and Saudi Arabia and its implications for parliamentary accountability;
believes serious damage has been done to the reputation of British business and to the credibility of the Government's campaign against corruption in the developing world;
urges the Government to cooperate fully with the United States Department of Justice inquiry into corruption allegations concerning BAE Systems plc and with other international organisations;
and calls for increased parliamentary accountability and transparency concerning the Government's dealings with the government of the Kingdom of Saudi Arabia.

I am delighted to be able to introduce another debate on the investigation of alleged corruption overseas. I have previously introduced two of them—one on 7 February, which was also an Opposition Day debate, and an Adjournment debate on 1 May. Let me first explain and justify why we wish to return to the issue. It is important, as it goes to the heart of arguments about an ethical foreign policy, the rule of law and open government.

Since we last debated these issues, there have been several important developments that we must take account of and discuss. First, there are continuing arguments about the application of the law, which have been clarified by some of the discussions in the Constitutional Affairs Committee, which my right hon. Friend Mr. Beith chairs. The BBC and The Guardian have made revelations or allegations about the wider context of the al-Yamamah project.

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Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

The hon. Gentleman mentioned The Guardian, with which his party is in a conspiracy. [Interruption.] Has he the faintest idea of the sort of damage that he and his party are doing to one of the most successful industries in the United Kingdom? Britain's export defence industry employs around 76,000 people. Is he aware that 80 per cent. of those exports emanate from the air sector, and that BAE Systems is the most successful company? His party's motion today is sending a signal to our competitors and commercial adversaries around the world that it does not give a damn for that industry's employees in our country, because we shall ensure that—

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Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons

Order. Interventions should be brief. The hon. Gentleman is making a speech.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

As my colleagues behind me have just said, I wish that we were in conspiracy with The Guardian. I always tend to regard it as a rather pro-Government newspaper. None the less, that is not the central point.

I want to clarify the fact that we have no objection to British companies selling arms to a friendly country provided that it is done legally, is not subsidised, is on a commercial basis, and satisfies the export control regime's proper tests. If the awaited contracts satisfy those tests, we will have no quarrel with them.

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Photo of David Taylor David Taylor Labour, North West Leicestershire

The hon. Gentleman refers to the Export Control Organisation by implication. Does he agree that for the Defence Export Services Organisation to exist in parallel with it sends entirely the wrong message about arms exports, and that we should tighten up the system to ensure that arms are not sent to unstable regimes, war zones or countries that routinely abuse human rights? Why does he not refer to that in the broader context of his comments?

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

I shall refer to DESO. Certainly, the export control regime needs to be tightened up, as I said from the Front Bench when the matter went through Parliament, but it is as it is. I think the hon. Gentleman's specific point relates to DESO, and the Chief Secretary to the Treasury made the interesting observation a few days ago that it is an anachronistic body that should be closed. I shall be interested to hear during the debate how the Government respond to that.

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Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

Does the hon. Gentleman understand the sort of damage that he is doing to the industry? I have a BAE Systems plant at Samlesbury in my constituency which employs thousands of people in highly paid and skilled jobs. The only people who will get any joy from the Liberal Democrats' motion today are our competitors.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

I have already given the answer to that question to Mr. Howarth. Mr. Evans ascribes to me a power of argument that is flattering. There are questions that must be asked, and I am sure that he would not want us to be uncritical of the arms exports regime, to which we shall refer.

We are updating the arguments, partly to allow for the legal issues, partly to allow for the allegations concerning the al-Yamamah project as a whole, partly to bring up to date the Organisation for Economic Co-operation and Development inquiry's approach to the question, and partly to bring into the discussion the highly relevant and worrying developments in relation to the United States, which only this weekend insisted on reopening the case, and on British collaboration with that. It would probably be useful to start with an overall approach. When we introduced the debate six months ago, the key issue was the rule of law: whether it was being applied and what the law on bribery and corruption in overseas business meant. We have argued those points, and they continue to be relevant in many respects.

The underlying theme that I wish to develop concerns the broad question of parliamentary accountability and how the new thinking that the Prime Minister has introduced, which is welcome, about greater openness in government and, specifically, greater openness about security matters should apply in this area. The key argument, to which we keep returning in the debate about the Saudi project and al-Yamamah, concerns national security interests. That argument was invoked as the reason for stopping the Serious Fraud Office inquiry, for limiting the information given to the OECD and for not proceeding with or publishing the National Audit Office investigation. It is the argument that is used for not answering most of our parliamentary questions on the subject.

Let me make it clear that just as I and my colleagues respect perfectly open, honest arms exports, we fully understand and respect arguments about national security. On a personal level, as a 30-year-old civil servant I worked in the Foreign Office, and the division that I headed included, among other things, quite an important communist country at the height of the cold war. I was fully indoctrinated in the intelligence process and the Official Secrets Act and honoured its obligations. I have always been perhaps excessively deferential to arguments based on national security. However, some fundamental questions about the workings of the intelligence and security arguments need to continue to be probed, because the Government have used them in unsatisfactory ways.

I have three points on this issue. The first concerns what could be called revelations, but are in fact points from the Government's evidence that was submitted to a recent High Court hearing brought by The Corner House and the Campaign Against Arms Trade. The Government set out—much more specifically and helpfully than when the Attorney-General and the Solicitor-General made their statements to Parliament—how the director of the Serious Fraud Office came to the conclusion that he should not proceed on national security grounds. That showed, in quite an extraordinary way, his reluctance to come to that conclusion.

There were three steps. In December 2005, there was a so-called Shawcross exercise by other Departments, which involved, I think, the Prime Minister. The director of the Serious Fraud Office and the Attorney-General rejected the recommendation that the director of the Serious Fraud Office cease to proceed with the inquiry. On 30 September—I do not think that this has been stated to Parliament, but it was stated to the court—a letter from the Cabinet Secretary to the Attorney-General and the head of the Serious Fraud Office explained that our counter-terrorist operations might be affected adversely if he proceeded with his inquiry. At that point, remarkably, not only the head of the Serious Fraud Office but the Attorney-General rejected the advice. On 30 November, the head of the Serious Fraud Office was brought together with the British ambassador to Saudi Arabia and phrases such as "Lives were at risk" were put to him. He did not immediately cease the inquiry; it required three meetings with senior officials and the ambassador before he finally agreed, on 13 December, to do so.

That is taken from the account that the Government have given of the chronology—I am not manufacturing any of it. [Interruption.] I have thought carefully about it, and it is all set out here in print. I am surprised that the Minister finds this so difficult; I am not referring to press reports.

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Photo of Kim Howells Kim Howells Minister of State, Foreign & Commonwealth Office

I do not find the concept difficult to understand. I said from a sedentary position, "He thought very carefully about it." If it took the director of the Serious Fraud Office three meetings, one would have thought that the hon. Gentleman would have been glad that it was considered seriously and over a length of time.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

I am glad. It reflects well on the director of the Serious Fraud Office that he took his duties so seriously. It is clear that either he thought that the public interest in proceeding was compelling, and sufficient that he could initially ignore advice about counter-terrorism, or he found the arguments about counter-terrorism unpersuasive.

Subsequently, the director of the SFO said in evidence to the Select Committee on Constitutional Affairs, chaired by my right hon. Friend the Member for Berwick-upon-Tweed, that the one item that persuaded him to change his mind was a memorandum from the Prime Minister, to which was attached a more detailed memorandum from Sir Richard Mottram, who is a security adviser to the Government. He may not have been aware at the time, although it has since been pointed out, that that same civil servant, who I am sure is a man of enormous integrity, was, 20 years previously, private secretary to Michael Heseltine, who set up the meetings that led to the al-Yamamah agreement.Whatever Sir Richard's competence and integrity, he was hardly disinterested.

A problem that has occurred throughout this issue is that of senior people in government—another is the head of the National Audit Office, who was also an MOD official—who, for all their high levels of competence, professionalism and integrity, do not have a disinterested position. Resurrecting my O-level Latin, I have to ask, "Quis custodiet ipsos custodes?" Who will guard the guards? I think that that is highly relevant to the present context. That is the first question that I wish to pose about the intelligence argument.

The second problem is that the argument that the counter-intelligence issues should deter an investigation sounded to us inherently implausible even six months ago because the relationship with Saudi Arabia is a two-way one, underpinned by a memorandum of understanding—I do not think that that had been made clear before—and is therefore a formal arrangement from which Saudi Arabia benefits as we do. It was unclear why one party to that agreement should imperil a bilaterally mutually advantageous arrangement.

The assertion that that argument was a compelling one has become even less plausible for two reasons. First, the embarrassment that could have been caused to senior Saudis has become history. Prince Bandar has been named and embarrassed, and all the information about his activities has now been published. If the intention was to protect him from that embarrassment, it is already history. Secondly, and much more serious, is the decision of the United States Department of Justice to intervene and to investigate. One has to ask why on earth the United States, which is leading the war on terror and which has far more reason to be concerned about maintaining its security relationship with Saudi Arabia than we have, should pursue a potentially embarrassing investigation into the relationships between BAE Systems and Saudi princes.

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Photo of David Borrow David Borrow Labour, South Ribble

Will the hon. Gentleman elaborate on the independence of the US Department of Justice and its relationship with the US Administration and the extent to which the Administration could directly influence the Department of Justice on that point?

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

That is a very helpful intervention. The head of the Department of Justice is, I believe, a Mr. Gonzales, who is a political appointee of the Bush Administration. If the Bush Administration had any interest in safeguarding their carefully nurtured security relationship with the Saudis, surely that would have manifested itself.

I am glad that the hon. Gentleman intervened, because he made an extraordinary remark reported in the press this morning. Apparently, following a meeting with Lord Drayson, the Minister responsible for defence export sales, he urged the Government not to co-operate with the Americans in their inquiry. It is absolutely extraordinary to say that we should put at risk our most important bilateral relationship on intelligence and security matters to protect the Saudis from further embarrassment. I can only hope that hon. Gentleman was not speaking for the Minister.

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Photo of David Borrow David Borrow Labour, South Ribble

May I clarify? The comment from me in The Guardian this morning came not from a discussion with the journalist from The Guardian, but was an interpretation of comments that I made to another journalist from my local newspaper. Those comments were interpreted without my consent and without any discussion between myself and the journalist from The Guardian, and the interpretation does not reflect the comments I made to the Lancashire Evening Post.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

I thank the hon. Gentleman for his clarification, and I hope that he speaks for the Government. I will take it as read that the Government will give their maximum co-operation to our chief ally in this matter.

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Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Jack Straw, Lord Chancellor), Ministry of Justice

Has it not crossed the hon. Gentleman's mind that American interest in the subject might be due to the fact that it would have liked the contracts that BAE Systems secured, and that it would do a great deal to destabilise British industry and tens of thousands of jobs across Lancashire?

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

Is the hon. Gentleman seriously suggesting that President Bush and his Administration are putting at risk counter-terrorist operations to placate American companies? I do not know enough about the United States to know how perverted its values are, but he seems to be making an extraordinary case.

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Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Jack Straw, Lord Chancellor), Ministry of Justice

I do not think that the issue was a consideration for President Bush, or that intelligence between the United States and Saudi Arabia would have been affected. Obviously, the intention was to get to the bottom of a commercial arrangement, because it is in certain American companies' commercial interests to see BAE Systems struggle.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

I do not understand the logic of the hon. Gentleman's argument at all. Why on earth should the intelligence arrangements between Britain and Saudi Arabia be compromised, but not those between the United States and Saudi Arabia? That makes absolutely no sense.

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Photo of Angus Robertson Angus Robertson Shadow SNP Spokesperson (Defence), Shadow SNP Spokesperson (Foreign and Commonwealth Office), Shadow SNP Westminster Group Leader

Does the hon. Gentleman agree that we should not lose all sense of proportion, and that we must remember what the issue should surely be about? Does he not remember the once much-lauded phrase, "an ethical foreign policy"? If we are to have such a policy, and properly regulated arms exports, which my party and I support, surely there must be the highest standards of probity, and surely inquiries should not be stopped at the whim of the Government.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

That is right, but in a way I am more positive and optimistic than the hon. Gentleman; the new Prime Minister said very clearly that he wants more transparency in government, and a more ethical foreign policy. I hope that he is as good as his word. If he is, this is an opportunity to demonstrate it.

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Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

I do not know what the Liberal Democrats have against BAE Systems specifically, or military manufacturing generally, because during the general election they threatened to stop the next tranche of Eurofighters if they came to power. Again, that would cost thousands of jobs. What do they have against BAE Systems in my constituency?

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

I have nothing against that company at all, and I welcome its continued commercial activity—providing, of course, that it abides by the law, as we all must.

Let me move beyond the arguments about intelligence to specific issues that have arisen in the past six months. The first relates to the legal position, and the differing views of the former Attorney-General and the Serious Fraud Office. As I said, those views were brought out by the Select Committee on Constitutional Affairs, chaired by my right hon. Friend the Member for Berwick-upon-Tweed. When the then Attorney-General made his statement to the House of Lords, it was said that the arguments for ceasing the investigation were not simply about national security. He has said that there were severe technical and legal difficulties in bringing any prosecution. Many distinguished people have pitched in and supported that argument, and I seem to remember that they included Mr. Grieve, the Conservative spokesman, who is a distinguished lawyer in his own right. He put on his legal hat, as he put it, and concluded that

"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."—[ Hansard, 7 February 2007; Vol. 456, c. 884.]

I am not a lawyer, but there seems to be an element of common sense to the idea that it is rather difficult to apply the law when one of the most senior members of the Government are involved. The problem is that the argument does not seem to have persuaded the head of the Serious Fraud Office, who persists in holding a contrary view. When my right hon. Friend the Member for Berwick-upon-Tweed conducted his inquiry, he specifically said to the head of the SFO that the Attorney-General

"stated that in his view, as opposed to yours, the ground for ceasing the investigation was that it could not lead to a successful prosecution."

The head of the SFO, who had had several months in which to reflect, and who had no doubt received legal advice, replied:

"He certainly took that view. I took a slightly different view. I took the view that I would prefer to continue the investigation, to obtain the evidence, before making a final decision".

It is important that we understand whether it is the Attorney-General who is right or the head of the Serious Fraud Office, a very senior official, who, unlike many of the other people involved in the argument, has no political axe to grind, so we must take his views seriously. If the Attorney-General, the Government and the Conservative spokesman are right, there are serious implications. The first is that we have a highly defective law governing bribery in overseas countries, which in many cases simply cannot be applied. That raises the question as to why the head of the SFO is spending taxpayers' money pursuing further investigations, which, among other things, include South Africa, where the alleged recipient of money is none other than the vice-president, and where precisely the same argument about principles and agents could be advanced as is being advanced in the case of Saudi Arabia. If the law is defective, do the Government propose to change it? There was nothing in the sketch of the Queen's Speech that indicated that an improvement was coming, but if the Government really believe that the law is inadequate and cannot be applied, do they have any plans to change it.?

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Photo of David Borrow David Borrow Labour, South Ribble

Will the hon. Gentleman elaborate on the changes to the law in 2001 and the extent to which that has influenced the debate, the extent to which events took place before and after the change in the law, and whether we are considering matters pre-2001 or post-2001?

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

I have not seen the evidence, so I do not know the answer to that question. I think that most people assume that there is an element of both. Certainly the 2001 legislation was a genuine attempt to incorporate the Organisation for Economic Co-operation and Development convention into British law. The problem that we now seem to have is that it cannot be applied, or certainly cannot be applied in cases where major figures in a recipient Government are involved. That is the issue. I do not know the answer and I hope that the Solicitor-General might be able to clarify that.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

The hon. Gentleman asserted some time ago—I have taken this time to track it down—that it was only the Select Committee's inquiry that disclosed the difference between Mr. Wardle and the Attorney-General. That is utterly wrong. The Attorney-General disclosed that difference of opinion about a point of law in the House of Lords when he first went there within minutes of the director of the SFO making his announcement. The hon. Gentleman should know that a process has been under way for some time to try to improve the corruption law, the Law Commission is seized of the job of doing exactly that and will produce a consultation document later this year, and that we hope for a draft Bill to be attached to it shortly thereafter with a view to legislating. It is not that the law cannot be applied, but it must be improved on and it will be.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

That is a helpful clarification. On the first point, of course the hon. and learned Lady is right that the difference of view surfaced earlier. I simply mentioned it because the head of the SFO persisted with his arguments several months after the event, presumably having reflected a great deal upon it. Her final comment is helpful and positive.

The first major set of developments relates to those arguments, the second relates to the allegations—if that is what they are—by the BBC and The Guardian about the fuller aspects of the al-Yamamah inquiry. When I first mentioned the dreaded name The Guardian a few moments ago, several hon. Members jumped to their feet with outrage that we should be giving any credibility to this issue at all. However, although that newspaper is not particularly friendly to the Liberal Democrats, it is a serious newspaper, which gives the full power of editorial support to this particular story. But more important than that is the role of the BBC, which did, after all, lose a director-general and a chairman because it had not done its homework correctly on an important and sensitive issue a few years ago. I find it difficult to believe that it would have lent its credibility to a story of this kind unless it had carefully sourced and checked it.

No one has suggested that there is a contrary version of events, so let us assume for the moment that in the case of the al-Yamamah contract, what happened is broadly what has been described in that account. It means that, effectively, there are two sets of corruption allegations. Perhaps corruption is too loaded a word in this context, so let us say that there are two sets of problems. The Serious Fraud Office investigated the first problem, which dates back to a specific complaint. It originated in Robert Lee International, an intermediate company, which provided services to the Saudi royal family. There was a whistleblower, Edward Cunningham, who went to the SFO with his evidence, which was the basis on which the inquiry was launched.

The investigation by the BBC and The Guardian makes a much bigger and more substantial allegation, and it reaches to the heart of government: it is not simply a matter of a relationship between a company and a named individual. The allegation is that £1 billion was paid over a 10-year period at three-monthly intervals into one of two accounts in Riggs bank in the United States under the name of Prince Bandar. He is a very important figure in the Saudi regime. He was named first not in that investigation: I mentioned his name in an Adjournment debate a few weeks before, because it was clear that, where he was concerned, some extraordinary developments had occurred. It had been pointed out to me that, for example, in the period since July 2006, he visited this country 14 times in a private jet that landed at an RAF air base, and that he had six meetings with Foreign and Commonwealth Office officials and undisclosed meetings with others.

That is clearly somebody who was at the heart of our official relationship with the Saudi Government. There exists a very close relationship between an individual and the British Government, and the same individual is named in the context of the very large payments in this case. I stand to be corrected, but I understand that Prince Bandar is currently the head of intelligence in Saudi Arabia, and that he has held major roles in that Government, including that of ambassador to the United States.

If the accusations cited are in any way correct, they raise major issues about the role of our Government and their conduct and accountability. We are all operating in the dark, and I have no other evidence, so let me describe what it is argued took place in the context of Prince Bandar and the payments. The House will forgive me if I read for a few moments, because the process is complex and we all need to understand it:

"According to legal sources familiar with the records, BAE Systems made cash transfers to Prince Bandar every three months for 10 years or more. BAE drew the money from a confidential account held at the Bank of England that had been set up to facilitate the Al-Yamamah deal...Both BAE and the government's arms sales department, the Defence Export Services Organisation (Deso)," which we have just discussed,

"allegedly had drawing rights on the funds, which were held in a special Ministry of Defence account run by the government banker, the paymaster general. Those close to Deso say regular payments were drawn down by BAE and despatched to Prince Bandar's account at Riggs...Under the terms of a previously unknown MoD instruction from the department's permanent secretary, Sir Frank Cooper, the payment deal would have required Deso authorisation."

It is just conceivable that that is all fantasy, dreamed up by somebody in the bath trying to sell a few more newspapers, but that is improbable. It is a well sourced story that appears entirely consistent with what many independent sources have argued in the past. If the story is true, or even approximately true, it raises issues about two major arms of government. First, there is the financial arm, which is the Treasury and the Bank of England. In the past, I asked the then Chancellor of the Exchequer whether he would explain his role in the matter, but of course, he transferred the questions to the Ministry of Defence, arguing that it was nothing to do with him. He has also said publicly that he knew nothing about it. I am sure that he did not, because the arrangement would not have operated at that level. As has been acknowledged in parliamentary answers, an account was run through the Bank of England. That raises important questions of public accountability about who monitored that account, who was responsible for it and what their level of seniority was, and we deserve answers.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

No crime has been committed that I am aware of. If enormous sums of money are swilling through Government Departments, surely it is an elementary requirement of our system of government that somebody is accountable to Parliament to explain that and to answer parliamentary questions. The Opposition parties should ask those questions, rather than trying to suppress them.

The heart of the matter does not lie in the Bank of England or the Treasury; it lies in DESO. The account that I have quoted went on to say:

"Before the investigation was abandoned, the SFO interviewed Alan Garwood, head of DESO. Sources close to the arms sales unit say that he and...the commercial director of the Saudi project were questioned about the reasons for authorising the payments."

In order to make sense of what happened on the al-Yamamah project, we need to know much more about DESO. As far as I understand it, DESO operates in an extraordinary way. It is paid a fee of 2 per cent. of the value of transactions by the Saudi authorities in order to conduct business on behalf of a British company. It is a Government Department that is headed up by somebody who is on secondment from a company linked to BAE Systems earning a fee from a foreign Government for commercial work. It may be that that is entrepreneurial activity in government that we should applaud, but surely somebody should explain the mechanisms and be accountable for them. Is 2 per cent. too much or too little? Where are the accounts relating to that extraordinary business?

What is at issue here is a question of parliamentary accountability that we have a duty to pursue. In my view, nobody has more of a duty to pursue it than the Public Accounts Committee. I am sorry that he is not here, but Mr. Leigh intervened very early in my speech on the last occasion we considered the matter to explain why the Public Accounts Committee did not wish to publish the original report into the al-Yamamah project, which he admitted that he had never read. None the less, he felt very strongly that the PAC should not publish that report. He said that

"the National Audit Office is concerned with the Government and not private companies".—[ Hansard, 7 February 2007; Vol. 456, c. 863.]

However, we now know that the Government are critically involved in all aspects of the operation, so, of course, the PAC must reopen the issue and investigate it as well as referring to its inquiry.

As a result of the exchanges involving Mr. Borrow, we have already touched on the third new issue that has arisen, which relates to the US Department of Justice. The United States is a close ally, but it also has strict laws governing overseas corruption—they were introduced rather sooner than ours in the Foreign Corrupt Practices Act 1977. Inquiries have been initiated, and perhaps they were prompted by competitor companies of BAE Systems—it is possible that there is a commercial motivation.

As far as the journalists who are looking at the matter can establish, the motivation is concern not with the big al-Yamamah architecture, which I have just described, but with a narrow set of transactions—the so-called red diamond payments—under which BAE Systems paid money for services, such as hospitality, for its friends and which flowed through US jurisdiction on this occasion. We do not know whether there is any basis to those inquiries, but it is surely necessary that the British Government give an absolute commitment to maximum co-operation, which means the sharing of files and the evidence that they acquired, because how else is our reciprocal set of obligations with the Americans to be honoured?

The fourth new issue that has arisen relates to our relationship with the OECD. At its March meeting, two months after our original debate, the OECD working group on bribery reached the following conclusions:

"the OECD Working Group on Bribery reaffirmed its serious concerns about the United Kingdom's discontinuation of the BAE Al Yamamah investigation and outlined the continued shortcomings in UK Anti-Bribery legislation. It urged the UK to remedy these shortcomings as quickly as possible and decided to conduct a further examination of the UK's efforts to fight bribery."

The OECD, in a peer group assessment of our progress, is highly critical of what the Government have done in this department, and will no doubt report in due course.

The aspect of the OECD investigation that leaves a particularly nasty taste is the allegations that have been made within the OECD itself that the Government did not pursue this in a completely detached manner. When I raised this in the Adjournment debate, the Foreign Office Minister who responded gave a very robust reply in which he categorically denied all the dirty tricks allegations that have been made, and did so with such conviction that I completely accepted what he said. None the less, a month later, officials from the OECD told the press—this is from a different newspaper; not the wicked Guardian again but The Independent

"'The dirty tricks boys were all at work', said a senior OECD official who asked not to be named. 'There was a lot of pressure on a lot of people.'"

I completely accepted the Government's assurances on this. However, will they explain what they are doing to assure the OECD, whose officials continue to argue that their reputations are being traduced by British officials, that they are pursuing their relations with it in a proper way?

Finally, let me look forward. Much of this is history. Things have happened in the past that are perhaps regrettable and do not comply with the standards that we currently expect in terms of anti-corruption behaviour. Nevertheless, it is possible for the Government to turn a corner on all this and to pursue their future investigations in a way that reflects the spirit, as well as the letter, of the original OECD provisions. Part of the proof of how the Government are approaching this will be how they deal with their future investigations; I think that six are lined up. I shall briefly enumerate them so that Ministers can indicate whether they are still live and whether they will be pursued by the head of the Serious Fraud Office.

The first case relates to Chile and the accusation of the £1 million payment to General Pinochet that was unearthed by a Chilean judge pursuing tax evasion. General Pinochet is of course dead, and was presumably the principal witness in that inquiry, so is the case still being pursued? The allegations in relation to Romania relate to the £7 million commission on a £116 million naval contract. The case in South Africa concerns a much bigger contract, where the difficulty is that a very senior figure in the South African Government is involved.

The case in Tanzania is particularly important because it relates to the full thrust of Government policy in Africa, which is to encourage good governance. The original corruption allegations related to a large payment by BAE Systems on an air traffic control arrangement that was opposed at the time by the current Prime Minister and the then overseas development Secretary. What has made it topical is that the alleged middleman, a Mr. Vithlani, has subsequently been named in Tanzania in accord with two other major corruption inquiries relating to a presidential jet and a military truck. Those who are concerned with honesty and probity in Tanzania are looking anxiously at whether the British Government will pursue their own inquiries.

In Jersey, an investigation was proceeding for several years into large payments made by Sheikh Hamad bin Jasim bin Jaber ath-Thani, who is Qatar's Foreign Minister. I understand that those investigations have now been discontinued. It was alleged in the Jersey press that that happened because of pressure from Britain, but that is entirely hearsay. However, it is important to appreciate whether the Qatar inquiry is proceeding.

Those are past inquiries, and as several hon. Members with constituency interests have intervened to say, there are potentially big contracts on the way. It seems to me that there is one simple way in which BAE Systems, with Government support, may ensure that the taint hitherto associated with many arms contracts is removed from any contract achieved or jobs secured. The mechanism to do that, which has been suggested by Transparency International, means that we should put the past on one side, and have an arrangement whereby an independent organisation, such as Transparency International or someone nominated by it, can vet contracts in order to certify that they have been achieved without bribery, and to establish that new contracts, whatever may have happened in the past, are entirely above suspicion. That seems to me a perfectly plausible and praiseworthy initiative, and I shall be interested to hear the Government's reaction to it.

Looking forward, if the Government pursue their investigations into those other allegations, which I think are still live, and if a mechanism can be found to ensure that any accusation of bribery is removed from future contracts, it is possible to move on from the episode in question. I hope that the Government will take into account the fact that we are in new territory—

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer

I am just coming to a conclusion, so let me finish.

What is required is a major step forward in terms of parliamentary accountability, in which the Select Committee on Public Accounts and other Select Committees of the House are able to investigate, in a more transparent way than in the past, many of the accusations that have been made and which appear to have substance.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department 5:02 pm, 16th July 2007

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

"supports the Government's stance against international corruption;
welcomes the action it is taking to tackle it;
and recognises that the decision to discontinue the Serious Fraud Office (SFO) investigation into BAE Systems plc and Saudi Arabia was taken by the Director of the SFO alone for reasons of national and international security.".

When the Liberal Democrats speak, money swills through Departments. The word "implausible" can be used liberally about the Prime Minister, the director of the Serious Fraud Office, the Attorney-General, senior civil servants and—very nearly—the Select Committee on Public Accounts. Prosecutions are stopped on a whim, and unsourced allegations from nameless people in newspapers are enough to rebut what Ministers of State have said in this House. An evidence-free zone surrounds the Liberal Democrat Front Benchers on this issue, and today we have heard a barrel-load of conspiracy theories that would disgrace a juvenile anorak.

I welcome the opportunity to respond to this debate. On the fundamental question of the Serious Fraud Office investigation nothing has changed, although we have had a number of debates on the matter in this House. I am going to take the opportunity to deal in some detail with the basis of SFO director's decision to stop the investigation in question, since clearly—let me put it as politely as I can—somebody still has questions about it.

The decision was taken precisely according to the requirements of our current, unwritten constitution. No Government have, to date, changed these requirements, which have existed for a very long time—probably as long ago as when the Liberal Democrats were last in office, a period which is into three figures and growing. A question may emerge whether it will subsist for 100 years to come, which is at least the length of time it would take for the Liberals to get back into power on today's showing—if anyone ever trusts such a totally disreputable set of peddlers of appalling scandal. The decision was taken by Robert Wardle, the director of the SFO. The SFO had been investigating for two and a half years whether officials were bribed to win the al-Yamamah contract for BAE Systems. Its view was that approximately another 18 months of investigation were necessary to decide whether there would be a prosecution. Unlike the other prosecuting authorities, the SFO is an investigatory body too.

The then Attorney-General, Lord Goldsmith, agreed with Mr. Wardle's decision to halt the investigation. Lord Goldsmith had undertaken a Shawcross exercise before the decision. That exercise is undertaken when the Attorney-General consults ministerial colleagues on the public interest implications of proceeding with a prosecution—or, in the case that we are considering, an investigation. It is a well established and wholly legitimate procedure, which Sir Hartley Shawcross articulated in 1951, when he was Attorney-General.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

I shall not give way during my account of the facts. After that, I shall do so.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

As I said, I shall give the hon. Gentleman ample opportunity to intervene later, but I shall go through the facts first because so many attempts have been made to obfuscate what truly happened that it is vital that the public understand who is firing with ridiculously bent bullets from the Opposition Benches.

Mr. Wardle explained to the Constitutional Affairs Committee the nature of the Attorney-General's superintendence role over the SFO. He said that he would brief the Attorney-General and the Solicitor-General on specific cases as a matter of routine— perhaps complex ones or those in which the public interest was likely to be important. He said that he did so in the al-Yamamah case and that the Attorney-General first initiated a Shawcross exercise in December 2005, consulting various Ministers. Dr. Cable tried to make something sinister of that, so let me make clear what happened. At that stage, views were expressed about the commercial implications that might flow from the investigation, but the Attorney-General concluded that it should proceed.

Let me mention the Organisation for Economic Co-operation and Development convention on combating bribery of foreign public officials in international business transactions, which we signed in 1997. Article 5 provides that investigating and prosecuting the bribery of foreign public officials shall

"not be influenced by considerations of national economic interest" or

"the potential effect upon relations with another State", hence the decision in December 2005 that commercial interests should not be relied on as a reason for stopping the SFO investigation.

In 2006, Mr. Wardle said that evidential issues and the public interest re-emerged as questions. He ultimately decided that, although he would like to continue the investigation to ascertain whether charges could have been brought, he came to know of issues that made him reach the following decision:

"To continue the investigation was in my view likely to cause grave damage to the public interest, to national security, and I fully accept that the result of the investigation would be uncertain."

Before that decision, Mr. Wardle consulted the Attorney-General, who received further views on the public interest in the form of a memorandum from the Prime Minister, which Mr. Wardle saw. Of course, I took no part in that decision, but I have now seen the memorandum from the former Prime Minister. It makes clear his view that developments in the SFO investigation could have given rise to a genuine and immediate risk of a collapse in UK-Saudi security, intelligence and diplomatic co-operation and that that was likely to have seriously negative consequences for the UK public interest in terms of national security and our highest foreign policy objectives in the middle east. The then Prime Minister was clear that the decision was a matter for the independent prosecuting authority, but felt that he would fail in his duty if he did not bring those issues to the Attorney-General's attention.

The former Prime Minister set out the centrality of Saudi Arabia and co-operation with its authorities to our efforts to protect British lives, and the risk of such co-operation being withdrawn. The document is some pages long and it goes into specific detail, which makes it compelling. It also deals with defence and foreign policy issues and states that the Secretary of State for Defence confirms the defence issues, and that both he and the Foreign Secretary share the Prime Minister's overall assessment of the damaging impact of the SFO investigation. That assessment is formed on the basis of advice from the Government's most senior national security official advisers. The Prime Minister's minute was accompanied by further assessments from very senior officials, including Sir Richard Mottram.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

I will not.

Those are not documents that could weigh lightly. Mr. Wardle told the Constitutional Affairs Committee that he had two subsequent conversations with the ambassador. Let me turn to that issue, because it is a subject of some—forgive me for using the term—scurrilous criticism of Mr. Wardle. What he did was to see those documents. He subsequently had two conversations with the ambassador, on 8 and 12 December—he had already had one conversation about the issues. At those meetings, he was able to probe the issues as much as he wished. Mr. Wardle is a professional lawyer at the head of an investigation and prosecuting body. I would expect him to be able to probe expertly the ambassador's position not only on the centrality of Saudi Arabia but on the likelihood of the breakdown of relations, which would offer danger to national security.

Mr. Wardle told the Constitutional Affairs Select Committee:

"I was satisfied, on what I had been shown and certainly the conversations I had with our ambassador...that the co-operation would have been withdrawn. In fact...I would have been satisfied it would have been. Certainly there was a very serious risk."

Asked by Mr. Tyrie, a Committee member, whether he thought everyone else would agree or whether others might not, Mr. Wardle said:

"I do not think it was finely balanced."

Mr. Wardle was asked about Saudi benefits from an exchange of intelligence—the very point in a thunderstorm of allegations from the Liberal Democrats that the hon. Member for Twickenham raised. Mr. Wardle said that the question "Were the Saudis bluffing?" was something that he went into in his conversations with the ambassador. From what he was told, they were not.

Mr. Wardle has been clear that the decision was his. While he properly consulted the Attorney-General in his statutory superintendence role, he has made it clear that he came under no improper pressure from the Attorney-General. Mr. Wardle has said, again to the Committee that Mr. Beith chairs, that he had "no problem with the way the government has handled this" and that the then Attorney-General had acted "absolutely professionally" and played "with a straight bat".

Mr. Wardle of course knew the state of the investigation, the input of expertise, the time that the SFO had already devoted to it and the £1.3 million estimated cost. He certainly understands the public interest in prosecuting corruption, since that is what he spends most of his life doing. Many of his cases are overseas corruption investigations. He has, with Lord Goldsmith, recently obtained blockbuster funding from the Treasury to investigate oil-for-food corruption in connection with the Saddam regime in Iraq. Mr. Wardle accepted in evidence to CASC that the decision had damaged the SFO's reputation for dealing with corruption. He will therefore have quite obviously taken that danger into account as well. There can be no doubt that he was in the best possible position to balance competing considerations and come to a conclusion as to where the public interest lay.

Lord Goldsmith saw the same documents, knew the investigation and obviously understood the purpose and need for corruption prosecutions for the greater good. He agreed with Robert Wardle's decision to halt the investigation. Lord Goldsmith was concerned that any prosecution might not succeed. Mr. Wardle would have preferred to try for further evidence and said only that the outcome was uncertain, and so they differed on that. Mr. Wardle took the decision. The Attorney-General's difference was on whether, since our law of corruption involves the need to show payment to an agent without the approval of the principal, the payments to senior officials in this case might have been made to, or with the knowledge or consent of, the relevant principals—a matter of evidence. In the event, this difference of view was not tested, because of Mr. Wardle's decision to halt the investigation on national security grounds.

The process that I have described is exactly what our constitution requires to happen, and the decision is evidenced by all concerned to have been taken independently, on information from a variety of sources that led Mr. Wardle to conclude as he did. I have set this out extensively because there has been innuendo upon innuendo, yet when the facts are thus set out, the innuendo is shown to be without any foundation. I hope now that it will now stop.

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Photo of Alan Beith Alan Beith Chair, Constitutional Affairs Committee

The hon. and learned Lady has referred extensively to the Select Committee. She has somehow implied that for the Select Committee to ask Mr. Wardle, who was an excellent witness before the Committee, a whole series of questions about how the decision had been arrived at—very similar questions to those that my hon. Friend Dr. Cable has asked today—involved some kind of innuendo. Surely asking questions is an entirely proper means, both in that process and in this debate, of establishing the facts of the matter.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

I have suggested absolutely no such thing. I have relied on the evidence. I am glad that the right hon. Gentleman agrees that Mr. Wardle was an excellent witness. I have spoken to him, and I would expect him to be an excellent witness and a wholly reliable figure. I see the right hon. Gentleman nodding. Can he not curb the excessive desire of those on his Front Bench to refer to what Mr. Wardle said as "implausible", when his own view conflicts with that by finding him an impressive witness? In my view, the inquiry by the Constitutional Affairs Committee was penetrating and drew out essentially what I have just put forward—namely, that this decision was taken independently after a great deal of independent thought by the expert who was best placed to take the decision.

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Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

The Solicitor-General has just stated that she hopes the mud-slinging and constant returning to this issue will stop. Does she accept that if that does not happen, it will have a commercial impact on BAE Systems, its workers and its future orders? Carrying on in this manner is jeopardising thousands of jobs.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

There was one particular part of the story that did not come out in the evidence to the Constitutional Affairs Committee, but which did come out in the Government's written case in the judicial review. This involved the separate exercise at the end of September 2006 in which the Attorney-General's office received further representations from the Cabinet Secretary about the public interest and raised the possibility of Saudi Arabia's co-operation on counter-terrorism being prejudiced. Nevertheless, at that stage the Attorney-General decided that the investigation should continue. That point did not come out in the evidence to the Select Committee. What precisely changed between 30 September and the separate exercise in December?

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

I have told the House what forces prevailed when the decision was taken. Surely that is the important point. I have no doubt that issues were raised, re-raised and considered, but it is clear that at some point this came to a head and a decision had to be taken on whether we should jeopardise our national security.

The OECD has scrutinised the decision and the basis on which it was taken. The SFO and other UK authorities have co-operated fully with the OECD. Indeed, the OECD issued a press release expressing its appreciation of the openness with which we have given our explanations, although hon. Members would not suspect that for a minute, given what we have heard from the Liberal Democrats today. We are satisfied that the decision made by Mr. Wardle was compatible with the OECD anti-bribery convention. We do not believe that the convention was intended to stop national authorities acting to protect their national security.

Opposition Members referred earlier to a legal challenge. That legal challenge brought by the Corner House resulted in the view that we were entitled to act to protect our national security—that must be a commonplace to everyone but the Liberal Democrats—which was borne out by Mr. Justice Collins, who refused permission for judicial review. He said the challenge was "bound to fail" on the basis that

"it is clear that national security must prevail and that no State could be expected to take action which jeopardises the security of the State or the lives of its citizens".

The claimants have now sought to renew their application for permission at an oral hearing, but the SFO will continue to resist the challenge. The head of the OECD Secretariat, Professor Michael Pieth, has himself apparently accepted that the OECD convention allows cases to be stopped on national security grounds, although he added the rider

"in an extreme case of necessity".

I am not sure on what basis he chose to add that qualification, but it should not be thought, asserted or pretended that the OECD has reached any finding that the halting of the SFO investigation amounts to a breach of the convention. It has not. It is, in any event, not the job of the OECD to inquire into individual cases or to act as any sort of judicial body. The UK remains a strong supporter of the OECD convention, and the UK authorities are co-operating with the OECD's review, which is about our anti-corruption laws in general.

Mention has been made of an investigation in the United States. The Home Office, as the central authority for these purposes, has received a request for mutual legal assistance from the United States. That request is receiving appropriate consideration in accordance with procedures and the relevant law. Any decision on that request will ultimately be a matter for the Home Secretary. Beyond that, I cannot comment at this stage.

I should like to speak about the future. I obviously accept that this case has been controversial—although not, I venture to suggest, as controversial as the Liberal Democrats would have us believe by stirring it up. I have tried to be as open as I possibly could be with the House today about the basis on which the director of the SFO took his decision. The same applies to the former Attorney-General and Solicitor-General, who went straight to Parliament when the decision was made, and they have been equally open in the numerous debates that have taken place in both Houses.

I think we need to consider, however, whether there are ways in which these issues can have brighter light thrown on them, perhaps at an earlier stage. As the House knows, the Prime Minister has committed the Government to a programme of constitutional reform, with the express intent of being as open and transparent as possible and of divesting the Government of powers that can be exercised by Parliament or with closer parliamentary supervision. It is well worth considering whether other ways can be found of informing Parliament about cases of this sort—in particular, those cases where decisions are taken on the basis of sensitive intelligence that cannot be made public.

I imagine that the Government would be in an altogether more comfortable position at large if we were able to say that, notwithstanding the total personal integrity and total constitutional propriety with which this advice was given, we had exposed material that underpinned it to a thoroughly security-checked group of Members of Parliament of all parties. That would have to be a group of people in whom obviously the public, but equally the security services and the prosecution authorities, had confidence.

I can say that the former Attorney-General himself provided information about such a case, in which a similar decision had been made—similar in the sense that it was a decision not to prosecute in the public interest. He recently gave to the Intelligence and Security Committee some background material that contextualised the decision and the legal reasoning behind it. It may be that more use could be made of such a mechanism or other options may be available.

The House will further know that, following the programme of constitutional reform set out in the Green Paper "The Governance of Britain", we will shortly issue a consultation document on the role of the Attorney-General and the Solicitor-General: they have identical powers and responsibilities, save that on the current configuration they are accountable to different Houses. One aspect of that consultation will concern the Attorney-General's responsibility for criminal prosecutions, and the Law Officers' accountability to Parliament. As part of that consultation, the Attorney-General and I will be happy to consider any proposals on such topics.

I should remind the House of what strong action the Government are taking against corruption world-wide. First, we are committed to reform of our law. That is far from straightforward. A draft Bill was subjected to pre-legislative scrutiny by a Joint Committee of both Houses in 2003—I was on that Committee, and if there is to be blame for delay, I shall have to share some of it as a Back Bencher, as we did not support that form of the Bill. We thought that it could be improved, and we sent it back. The Government responded, but the issues are hugely difficult, and we have asked the Law Commission to research the issues and prepare a draft Bill. That will include consideration of the experience of other countries that have implemented international conventions in this area. We have asked the Law Commission to prioritise that, and have made additional resources available to expedite it. It aims to produce a consultation document this autumn, with a report and draft Bill in 2008.

Meanwhile, let me set out the SFO's vigorous pursuit of international corruption. My hon. Friend the Minister for the Middle East will say more later about broader steps that we have taken and are taking. The SFO, however, is pursuing a large number of cases, including some relating to BAE Systems.

One such case concerns allegations of corruption in relation to a joint venture within the Czech Republic between BAE Systems and Saab to lease fighter planes to the Czech air force in 2002. The Swedes have started their own investigation, with the assistance of the SFO. On 10 May this year, the SFO called for a meeting at the headquarters of Eurojust at The Hague, with members of the Czech investigation team. The SFO tabled a proposal for a more co-ordinated approach to aid the investigation, which was agreed. Since then, there has been active co-operation, and meetings of the Czechs, Swedish prosecutors and the SFO took place last month in London.

The SFO is also investigating allegations of corruption, again in relation to BAE Systems, within the state of Romania. The case concerns a contract to sell refurbished frigates to the Romanian navy in 2002. Again, excellent support has been afforded by the Romanian authorities and a letter of request has resulted in a visit to Romania by SFO investigators, during which excellent co-operation was achieved.

An investigation is also taking place of a contract awarded by the Government of Tanzania in 1993 to upgrade its air traffic control systems. The contract was with Siemens Plessey, which was acquired by British Aerospace in 1998. The Prevention of Corruption Bureau of Tanzania has commenced its own investigation. The SFO has given considerable technical and legal support and advice to that body. SFO lawyers with junior counsel, an investigator and an experienced Ministry of Defence police officer visited Tanzania in May. Three members of the PCB are currently working on the investigation and are spending July at the office of the SFO, where they are receiving support and training.

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Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Jack Straw, Lord Chancellor), Ministry of Justice

Given that the Government and the SFO are pursuing all these additional investigations with regard to BAE Systems, does it not seem ridiculous that the Opposition should make such a big fuss over the al-Yamamah deal? As my hon. and learned Friend clearly outlines, the Government's commitment is forthright.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

The Government's anti-corruption commitment is well known everywhere except on the Liberal Democrat Front Bench.

Another investigation concerns corruption in South Africa relating to the sale in 1999 of Hawk and Gripen jets to the South African air force. In June, an SFO team visited Pretoria and held a series of meetings with the national police authority, getting strong support.

The SFO is currently investigating nine other overseas corruption cases, not including the oil-for-food investigation, for which special ring-fenced funding has been agreed. The SFO mutual legal assistance section is giving sustained support to investigations in a number of other jurisdictions, including Zambia and Kenya as well as to the judicial inquiry in Uganda investigating allegations of mismanagement surrounding the Global Fund to Fight Aids, Tuberculosis and Malaria.

The SFO is widely acknowledged as a lead player in international investigations and provides support and training to anti-fraud and anti-corruption bodies in less developed jurisdictions. It is entirely right that the BAE Systems decision is contextualised in that way.

Finally, Mr. Wardle and the former Attorney-General and Solicitor-General, in respectively taking and advising on, in good faith, a decision, which it was their duty to do, were bound to land in controversy, probably whichever way they decided. If there are ways in which, in particular, democratically elected representatives of other parties can be more fully informed on such occasions, it may prevent scandalmongering of the kind that we have seen today, and more broadly it will be in the public interest.

In the ways that I have proposed or in other ways, we are open to suggestion in the spirit of openness and transparency that underpins the Green Paper "The Governance of Britain". Now that I—like my predecessors and those of my noble Friend the Attorney-General—have done my best to be as open and transparent as it is possible to be within the terms of the current constitutional arrangements, I hope we can look forward to fair input and constructive support in our quest—in this area of the law as well as others—for a sound constitution for the 21st century.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General 5:30 pm, 16th July 2007

I congratulate the Solicitor-General on her new role.

The motion is very widely drawn. It is much too widely drawn for our liking. It is too scattergun in its approach, and, dare I say, plenty of heat and too little light are emanating from the Liberal Democrats. The motion is too vague to receive our support today; however, we think it appropriate to debate the issue of dealing with overseas corruption and to review past events, not least in an attempt to establish a new consensus on the pressing issue of addressing bribery and corruption. In that context, I should make it clear that the Conservative party believes there is a need for further and clearer legislation to tackle overseas corruption.

Let me begin by saying something about the Tanzania contract, which is mentioned first in the motion and which we believe to be a relatively clear-cut issue. In 2001, the British Government were asked to consider applications for export licences for the sale to the Tanzanian Government of a military-level air traffic control system. The system cost some £28 million, and the heavily indebted Tanzanian Government took on more debt to secure it. The International Monetary Fund told the then Prime Minister, Tony Blair, that it was very concerned about the impact of the purchase on Tanzania's external debt burden. Despite the opposition of all the most informed, respected and qualified observers, approval for the licences was forced through what I understand to have been a divided Cabinet by the Prime Minister. Last year the Serious Fraud Office and the Ministry of Defence began investigating the deal for alleged corruption. It appears that we are talking about £12 million of commissions, some 29 per cent. of the contract value being in commissions.

The Conservative party remains very concerned that the Tanzanian contract has damaged this country's reputation for fighting corruption. That is why my hon. Friend Mr. Mitchell called a debate on the issue as long ago as 30 January this year. I thank the Minister for taking the opportunity to tell the House today what point the investigations have reached, although I am not entirely sure from what she said that they have moved much further forward.

Corruption and bribery legislation in the United Kingdom has of course been under scrutiny for some time. Existing English law is based on the common-law offence of bribery and a range of add-on statutory offences. The scope of United Kingdom bribery offences was extended to bribes offered outside the United Kingdom by part 12 of the Anti-terrorism, Crime and Security Act 2001. However, as it seems to apply only to United Kingdom companies and not to foreign subsidiaries of such companies, its worth is limited.

Proposals for reform were made as a result of the Law Commission's 1998 report, and in December 2005 the Government started a consultation on the reform of corruption laws. In March this year, however, the Home Office announced that no consensus had emerged from the consultation, and that the Law Commission would be asked to undertake a further review. In parallel with the Government's efforts and in order to facilitate discussion of the need for comprehensive legislation, an alternative proposal was introduced as a Private Member's Bill in the House of Lords in November last year. At this stage it is unlikely to translate into legislation. Nine years down the road and despite all the usual new Labour anti-corruption spin and promises, we are not even close to new anti-corruption legislation. Has that become a priority now that a new new Labour regime is in place? The Solicitor-General addressed that issue in her earlier remarks, but will she commit to such reform being a priority?

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

I have already said that we have asked the Law Commission to prioritise that. We have given it extra resources and when we receive its consultation document, which we hope and expect will be accompanied by a draft Bill, we will give it all priority. I should add that it is not for want of trying that the Government have not managed to change this law. Proposals were scrutinised in depth, including by Conservative Members in the Joint Committee on the draft corruption Bill, and they were sent back. I hope that our efforts have made the law—when it comes—better than before.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I thank the Solicitor-General for the confirmation that that is a priority.

On the al-Yamamah contract, the 1985 deal took three years to complete and involved the sale of fighters and trainer jets, the construction of two airbases and a range of other equipment and training, provided by more than 3,000 British experts stationed in Saudi Arabia. The contract is reported to have been worth some £40 billion to the UK over the last two decades, and it has secured our country's position as one of the world's top defence experts. The contract was renewed in 1992, after the Saudis agreed to buy another 48 Tornado fighters, and in 2005, in the deal's third stage, the British agreed to sell up to 72 Typhoon planes.

The Serious Fraud Office launched an inquiry into allegations surrounding the al-Yamamah contract. SFO officers seized documents and arrested and interviewed some BAE Systems officials. The SFO discovered details of commissions being paid via Swiss bank accounts, although BAE and the Saudis have always denied any wrongdoing. The Saudi Government have also expressed anger at investigations into members of the Saudi royal family.

In December 2006, the then Attorney-General, Lord Goldsmith, stated that the SFO would discontinue its investigation. The SFO maintains that it was its own decision to pull out of the inquiry prompted by concerns over potential damage to national security, as opposed to its being forced to do so by the then Attorney-General. Lord Goldsmith stated that all relevant agencies were clear about the importance of UK-Saudi relations in the fight against terrorism. He said that if that co-operation were lost, there would potentially be damage to UK national security.

Some have argued that the SFO was told to stop the investigation because another multi-million pound deal with the Saudis might be lost. That is particularly relevant as it would constitute a breach of article 5 of the Organisation for Economic Co-operation and Development convention on combating bribery of foreign public officials in international business transactions. Its key words are:

"Investigation and prosecution of the bribery of a foreign public official...shall not be influenced by considerations of national economic interest".

However, the then Attorney-General and the director of the SFO—and the Solicitor-General again today—have claimed that the decision was not based on commercial interest, and the then Attorney-General made it clear in the other place on 1 February that he did

"not believe that the convention does, or was ever intended to, prevent national authorities from taking decisions on the basis of such fundamental considerations of national and international security."—[ Hansard, House of Lords, 1 February 2007; Vol. 689, c. 378.]

We do not dispute that interpretation of the convention, but the Liberal Democrats must say whether they do, and cut through some of the confusion they have caused.

There is, however, a further question: to what extent were there fundamental security issues? On 16 January, a report in The Guardian suggested that Sir John Scarlett, head of MI6, will not endorse the idea of British national security being at risk as a result of the probe, and that MI5 had no evidence that Saudi Arabia would sever its security links with the UK. However, following the report, the Foreign Office stated:

"Contrary to the Guardian article, SIS (MI6) shared the concerns of others within the government over the possible consequences for the public interest of the SFO investigation."

On 18 January, Lord Goldsmith stated that all relevant agencies were clear about the importance of UK-Saudi relations in the fight against terrorism and that if that co-operation were lost, there would potentially be damage to UK national security. Dr. Cable spells out the deliberations of the Attorney-General and the head of the SFO, but we understand that ultimately the SFO maintains that it decided to pull out of the probe and that it was not forced to do so by the then Attorney-General—although the Attorney-General has the technical power to do that. I note that the Solicitor-General has today given further details of the national security implications, which was helpful. The Attorney-General had another reason to end the probe. He said in the other place that he was

"sceptical about the evidential basis".

He also said that after clearing his diary and spending some three days reviewing the evidence in detail with SFO investigators, and then taking leading counsel's advice, he

"formed the conclusion that, ultimately, this case was not going to succeed".—[ Hansard, House of Lords, 1 February 2007; Vol. 689, c. 380.]

We ultimately accept that position, and would not want to spend yet more millions of taxpayers' money on a trial doomed to failure from the start.

The Government also spoke about the problem of getting evidence from Saudi Arabia in a scenario in which no one from BAE Systems or Saudi has said that they had done anything wrong.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

The point that the hon. Gentleman has not taken into account is that the director of the SFO disagreed with the Attorney-General's assessment of the likelihood of success in an eventual prosecution. It is not just a political point; it is an important point about what the law said at the time and what evidence there was.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

The hon. Gentleman is right, as the Solicitor-General said that he was. I do not think there is any dispute that there was a difference of opinion between the SFO and the Law Officers, but it seems that there was a progressive discussion, which eventually came to a conclusion.

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Photo of David Borrow David Borrow Labour, South Ribble

My understanding is that Mr. Wardle believed that there was a possibility of a prosecution if the investigation continued, not that he had the evidence to justify a prosecution, nor that he believed that there would be a prosecution. It was the Attorney-General's view that there was not and would not be enough evidence for a prosecution.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

That is right. The Attorney-General came to the House of Lords and said that there were two planks to the decision. On one, he had a difference of opinion with the SFO. That has come out, and more details have been provided today, for which we should be grateful.

The Liberal Democrats' motion states that

"serious damage has been done to the reputation of British business".

The issue is complicated by the fact that it is not just a case of a private company contracting with the Saudi Arabian Government. As my hon. Friend Mr. Grieve said:

"It is a relationship package at a Government-to-Government level rather than an ordinary commercial agreement."—[ Hansard, 7 February 2007; Vol. 456, c. 881.]

Furthermore, it is plain that the cultural view of bribery—or shall we call it greasing the wheels?—has changed dramatically in the UK since al-Yamamah was first signed more than 20 years ago. That cultural change was represented by the 1997 OECD convention. We could spend much time looking at the nature of agency payments, but as over-generous and distasteful as those payments and the related corporate entertainment may have been, and as many good headlines as were created for the tabloid press as a result, there seems to be inadequate evidence, after much investigation, to prove that a crime was committed.

On 7 February, my hon. Friend the Member for Beaconsfield, the shadow Attorney-General, concluded that there was no evidential basis for the Attorney-General having been involved in any wrongdoing in relation to the closure of the investigation. I see no reason to change our position now, but if any additional and significant information is available, it should be handed over to the relevant authorities for consideration.

The Liberal Democrats' motion refers—their Front-Bench spokesman did not—to

"the consequences for the role of the Attorney General".

However politically convenient it may be for them to attribute blame to the Attorney-General, we believe that there is insufficient evidence to sustain such an assertion.

Moreover, the Lib Dems seem to be missing the real issue, which is that what constituted the public interest was and is cultivated not by the Attorney-General, but by the Prime Minister, the Foreign Secretary and the Cabinet, all of whom have been remarkably quiet on the issue. My right hon. and learned Friend Sir Malcolm Rifkind said:

"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."—[ Hansard, 7 February 2007; Vol. 456, c. 886.]

The Solicitor-General today set out some more detail from the Prime Minister's memorandum, for which we were grateful. However, I note that it has been released now rather than at an earlier stage. I feel that the Government could have been more transparent in that regard.

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

When Robert Wardle was asked who took the decision and was told that the Prime Minister had asserted that he had, apparently he replied that it was his view that he had taken it.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I thank my hon. Friend for that clarification. Do the Lib Dems not realise how convenient it must be in practical terms for the current Labour Cabinet to let the ex-Attorney-General be the primary target for their criticism? Do the Lib Dems believe, in constitutional terms, that removing the Attorney-General and Solicitor-General from Parliament would mean that their accountability to Parliament would improve? I would say that it would not. As they would not be able to speak in Parliament, the Law Officers could even more easily be used as a scapegoat by the Cabinet if things were to go wrong.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

I am quite puzzled about how the hon. Gentleman has managed to conjure up a situation in which the Cabinet is blaming the last Attorney-General, when I spent a long time this afternoon justifying and setting out in great detail why he did his duty properly and with integrity. No one is blaming him at all; he was right.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I certainly did not say—let me make this clear—that the Cabinet, or anybody else, is blaming the last Attorney-General. I am saying that the Prime Minister and the Cabinet could have been rather more transparent and open in their views of what constituted national security interests. They seemed happy to leave it to the Attorney-General to make that case for them when it is arguable that they should have had more of an input themselves.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

It is quite difficult to win in this case. The hon. Gentleman has complained already that the Prime Minister was ready to say that he took full responsibility, making it plain that he had had substantial input, and yet the hon. Gentleman complains that somehow that Prime Minister left the Attorney-General to carry the can when he should have intervened. The hon. Gentleman needs to be realistic about the allocation of appropriate roles. The Prime Minister made the position clear, the Attorney-General passed the view on, with his advice attached, and Mr. Wardle made the decision—it is very clear.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

We can disagree on that point.

The Conservative party believes that on the basis of the then Attorney-General's comments about the highly speculative nature of the inquiry and any final prosecution being unlikely, the decision to discontinue the investigation in view of the potential damage to our national security was inevitable and the only sensible course of action. However, it is important that lessons be learned from those events. The great failing of the motion is that it looks back rather than forwards. It does not even mention the need to improve the legislative framework to deal with corruption, although the hon. Member for Twickenham touched on that aspect in his remarks.

There is clearly a need for the Government to provide greater guidance on the operation of the 2001 Act and its impact on payments to individuals abroad, in addition to the Minister's support for earlier and better transparency on the mechanisms of Government decisions. That was certainly a welcome development, and we look forward to receiving further details on it. As for BAE, we welcome its decision to appoint Lord Woolf to carry out a review of its ethical standards and I note that the Minister provided the House with an update on the other SFO investigations into corrupt practices of UK businesses overseas.

Although we are unable to give our support to the Lib Dem motion, we hope that today's debate will reinforce the need for the Government to produce legislation to deal with the issues that have been highlighted by the motion. It is unacceptable to us that such an important issue as corruption is being dealt with in the form of a private Member's Bill, not least because it trivialises our need to comply with our obligations under article 1 of the 1997 OECD convention on bribery. The Government need to take responsibility for the issue and to move the agenda forward. I note and welcome the Minister's promise of a draft Bill and we hope that its delivery will involve less delay than in the past.

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Photo of David Borrow David Borrow Labour, South Ribble 5:49 pm, 16th July 2007

I begin by pointing out that BAE Systems is a major employer in my area; I chair the all-party aerospace group; I am a member of the Select Committee on Defence; and I am a member of the Quadripartite Committee, which is responsible for reviewing arms exports. I therefore come to the debate with a clear vested interest in defending the interests of my constituents. I ought also to put on the record the fact that in 1999, I attended the Paris air show with the help of BAE Systems. I mention that because The Guardian report this morning was slightly ambiguous.

My constituents and those of other Lancashire MPs would have preferred that the SFO inquiry had reached a conclusion. The inquiry went on for years before it was stopped, yet the controversy, the uncertainty and the damage to BAE Systems and the wider British defence industry continue. I would have been much happier if the SFO had come to a decision, either that there was no evidence to justify a prosecution—end of story, that is it—or that there was clear and good evidence and that a prosecution should go ahead. Now, however, we have the worst of both worlds, because there are people in the UK who are more than happy to keep stirring the story—the Liberal Democrats in the main, but also journalists from various newspapers and the broadcast media. They do not accept that the SFO inquiry was stopped legitimately, in accordance with the constitution and for the correct reasons; they want to keep the story and the controversy going.

What is clear and what people ought to recognise is the number of jobs in the defence industry in this country that will be put at risk if we continue to raise this issue and to stir the pot. The estimate that I have is that the current contract—which is not signed and sealed—with Saudi Arabia for 72 Typhoons is worth £6 billion in the first instance, and that if it is extended to support maintenance and servicing of the aircraft for 20 years, it could be worth £40 billion. The contract will support 16,000 jobs, mainly in BAE Systems in Lancashire, but also in Rolls-Royce in Derby and Bristol.

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Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

Does the hon. Gentleman accept that many of those thousands of people are not employed directly by BAE Systems, but work for smaller contractors and suppliers? All sorts of people throughout Lancashire depend on a healthy and vibrant BAE Systems getting the order.

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Photo of David Borrow David Borrow Labour, South Ribble

I agree wholeheartedly. It is not only people working for the supply chain and the big companies in Lancashire who are affected. Few constituencies in this country do not have defence companies with direct links with either BAE Systems or another company that could be damaged by the continuation of this campaign by the Liberal Democrats. I sometimes wonder whether the Liberal Democrats realise that they have defence companies in their own constituencies. Do they realise the consequences of the campaign that they are waging, or are they so busy listening to the metropolitan chattering classes that they have forgotten the jobs, families, mortgages and so on that will be at stake if they continue to stain the reputation of the defence industry in the UK?

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

Everyone in the House realises what economic interests are at stake. It is just that some of us think that the rule of law is more important, because on the rule of law depends the whole of the economy, not just parts of it.

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Photo of David Borrow David Borrow Labour, South Ribble

Here we come to the heart of the problem. My hon. and learned Friend the Solicitor-General explained in detail the constitutional process that the Government and the Law Officers went through with the SFO before a decision was made to stop the investigation into the deal with Saudi Arabia—a deal that started more than 20 years ago. But Liberal Democrat Members do not accept the basis of that decision, so they wave the rule of law and say that it is not being applied, even though Ministers have explained in great detail every stage of the process that led to a decision that was made in the national interest. I assume that they do not agree that the decision was in the national interest, either, and that they are prepared to put at risk UK security by continuing their campaign.

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Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Jack Straw, Lord Chancellor), Ministry of Justice

Has not our hon. and learned Friend the Solicitor-General convincingly made the case that the correct process was gone through and that the rule of law has been applied? What is in question is the Liberal Democrats' motives. Clearly, the rule of law has been applied and part of the assessment has been put to them. Why do they persist in stirring the pot, causing all this uncertainty and instability in our industries, when they know full well that many jobs are at stake?

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Photo of David Borrow David Borrow Labour, South Ribble

I agree completely with my hon. Friend. Over the weekend, thinking about the debate, I wondered what the Liberal Democrats would do if, by some fluke, after the next election they found themselves in government, with one of their number responsible for this matter. Would they open all the cupboards and filing cabinets and publish all the information on the complexities of the agreement that was made in 1985 with Saudi Arabia and subsequent agreements—agreements that were made Government to Government as well as with BAE Systems and that were largely confidential? Would they simply forget about all those understandings between Governments and simply print, publish and distribute every bit of information they had? They seem to be arguing that that should be done.

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Photo of David Borrow David Borrow Labour, South Ribble

I understand that the OECD is not doing so.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

Even the Liberal Democrat spokesman, Dr. Cable, understood and asserted that we were not dealing with an OECD inquiry into the case. Perhaps Lynne Featherstone should listen.

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Photo of David Borrow David Borrow Labour, South Ribble

I have been around this place long enough and tangled with Liberal Democrats locally often enough to know that the truth and the Liberal Democrats are rarely in the same room.

I have spoken with a lot of my constituents who work for BAE Systems. They recognise that we have to follow procedures and, if something wrong has been done, they want people to be prosecuted. However, they also say to me, "David, this deal was done 20-odd years ago, when Mrs. Thatcher was Prime Minister in a Conservative Government. We have had a Labour Government for 10 years, and the law has been changed and tightened up. The allegations that have been made relate to a deal that was made in 1985. The payments were presumably made after that, with the knowledge of the Saudi Arabian Government, with the knowledge of our Government and with the knowledge of BAE Systems. Where is the bribe? Where is the criminal activity? What is legally wrong? If all that was known by the SFO, why did it not prosecute? What else is there that could suddenly make what was done a criminal activity?"

My constituents simply want some security. They want to be assured that the jobs that they have been doing, and doing well, for the past 20 years making military aircraft that have been sold to and flown in Saudi Arabia can continue with the next deal for the Typhoon. Many workers in Brough are waiting for a similar deal on the Hawk. Those workers do not want their jobs to be put at risk by people continuing to stir the pot and besmirch the good name of BAE Systems.

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Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

If companies and countries could sponsor motions, the motion before the House would certainly be sponsored by all BAE Systems's competitors outside the United Kingdom. The French, the Germans, the Spanish and of course the Americans would rub their hands if they saw the motion. The real winners would be our competitors, and the real losers would be our constituents and those who work for BAE Systems and its suppliers.

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Photo of David Borrow David Borrow Labour, South Ribble

Yes, and I cannot really see our opposite numbers in Congress, or in the French National Assembly, having this sort of debate, or their parliamentarians seeking to damage their own defence industries and put their own workers out of jobs.

The issue does not just affect BAE Systems; that is what causes me ever more concern. The continuation of the campaign is damaging the reputation not of one company, but of the whole defence industry in the UK. Most defence industry companies will not go on the public record and say so, but senior people in many leading defence companies in this country tell me privately that they are beginning to worry about the impact that such campaigns will have, if they continue, on their ability to get orders and keep work for their companies.

A number of Liberal Democrat Members have major defence companies in their constituencies. They are being carried along by the campaign and the applause of The Guardian and "Panorama", but they ought sometimes to scratch their heads and wonder whether they are forgetting that the bread and butter of politics is people being in jobs, being able to pay the mortgage, and feeling secure about the future.

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Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Jack Straw, Lord Chancellor), Ministry of Justice

I have just heard the accusation made, from a sedentary position, that we are turning a blind eye to the issue, but no one has accused anybody of being guilty. The Liberal Democrats do not have the guts to make a clear allegation—not even in their motion. Let us be clear: there has not been a crime. Any payments made were made over the table, and not under it, as has been alleged by the Liberal Democrats.

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Photo of David Borrow David Borrow Labour, South Ribble

The Liberal Democrats have done a lot of mud-slinging at BAE Systems and the Government this afternoon. None of it amounts to anything, but it does damage the reputation of a fine company. I do not think that the Liberal Democrats truly understand the damage that they are doing. They have not come up with a single allegation of criminal wrongdoing, but they insinuate that there has been wrongdoing all the time. Fundamentally, things come down to one key issue: they do not believe that the Serious Fraud Office inquiry should have been stopped. They think that it was wrong of the SFO to stop it, and they do not accept the information that my hon. and learned Friend the Solicitor-General has given to the House. Liberal Democrat Members are nodding their heads; they just do not accept that information, but they have no evidence to justify not accepting it. They simply prefer to go along with certain people in the media and stir things up, hoping that they can continue to damage the Government, without realising that they are damaging the prospects for the continued employment of many of our constituents.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice 6:04 pm, 16th July 2007

In the final paragraph of his speech—but sadly not in the rest of it—Mr. Borrow made some points with which I agree. I shall raise five issues that arise from the events that we are discussing. The first is the damage done to the Serious Fraud Office's, and the country's, reputation for pursuing corruption. That such damage was done was conceded by Mr. Wardle in his evidence to the Select Committee on Constitutional Affairs; he said that "of course" there had been damage. The question now is what we—a country that likes to think of itself as being at the forefront of the fight against corruption across the world—can do to restore our reputation.

Of course, the one thing that we should not do is refuse to co-operate with other countries that are attempting to investigate the events from their point of view. That is why the issue of investigation by the US Department of Justice is so important: it gives our country an opportunity to show that it is not being evasive, that it is not trying to avoid the truth coming out, and that it wishes, along with other institutions and countries, to pursue corruption.

My second point is about the position of the Attorney-General. Mr. Djanogly asked why we mentioned that issue in our motion. There are two distinct points to be made, both of which have been referred to already, largely by the Solicitor-General. One is about the Shawcross exercises, and the other is about the Attorney-General's lack of distance from particular decisions to prosecute. As the Solicitor-General said, in the Shawcross exercises, Ministers make their views about the public interest known to prosecutors via the Attorney-General. The problem that arose from the case that we are considering is that until very recently, it was unclear precisely what happened, precisely how many Shawcross exercises there were, and precisely how they were dealt with.

The first Shawcross exercise was in December 2005. The second, which has only recently come to light, was in September last year, and the third one took place at the turn of the year. Is that the right way for the Government to communicate their views on the public interest to prosecutors? That process needs to be far more open. I welcome the fact that the Solicitor-General said that the case might be the start of providing at least some openness to Parliament. I understand that she said that the underlying points about national security should be revealed to a committee of Privy Councillors—people who could be trusted with the information from a national security point of view. That is a good place to start. The fact that a Shawcross exercise has taken place—but not necessarily all the information in it, which it might not be wise to put in the public domain—ought to be revealed to the House. It should be revealed that the Government have taken a policy decision to make a point to a prosecutor. That point needs to be discussable, at least in general terms, on the Floor of the House.

I want to discuss the Attorney-General's distance from individual prosecutions and, perhaps more importantly, the confusion about what the Attorney-General's precise role is. The statutory language states that the Attorney-General has "superintendence" over the Director of Public Prosecutions, the director of the Serious Fraud Office and the equivalent in Her Majesty's Revenue and Customs, but what does the word mean? How does the relationship really work? The case that we are discussing illustrates the problem. Here I refer to the Government's response on the judicial review proceedings between the Serious Fraud Office on the one hand, and Corner House Research and Campaign Against Arms Trade on the other. It reveals that in the first Shawcross exercise in December 2005, "The Attorney-General decided" that the investigation should continue. He did so quite properly, because the argument that had been put to him by the Prime Minister was entirely improper. It was an argument based on commercial considerations, which are ruled out by the OECD treaty.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

There was nothing improper about the Prime Minister putting forward his concerns about commercial considerations. What would have been improper would have been for the Attorney-General, in breach of the convention, to take that on. Obviously, the Prime Minister puts forward concerns to Ministers about a range of matters. He is not constrained, as the Attorney-General is, by the OECD treaty, because the decision is taken elsewhere.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

That raises an interesting point about the degree to which the Prime Minister is bound by international law, which has all sorts of interesting consequences that I will not go into today but that are important. Nevertheless, the point that I was trying to make was: who made the decision? The decision in December 2005 to continue with the investigations was made by the Attorney-General, and it was the right decision.

With regard to the September Shawcross exercise, again information comes from Ministers to the Attorney-General, and again the document says that the Attorney-General made the decision. At that point the issue was national security. At that point what was being put to the Attorney-General was that the relationship between this country and Saudi Arabia might be prejudiced and that therefore there might be a national security consequence. At that point, again, the Attorney-General took the decision that the investigation should continue.

In the final exercise, in December 2006, we are told—there is no reason to disbelieve this—that the director of the SFO, not the Attorney-General, took the decision. Mr. Wardle looks at the papers that have come to him from the Prime Minister's office, from Sir Richard Mottram, and takes the initiative to talk to our ambassador in Saudi Arabia, and at that point, the director decides to call off the prosecution for reasons of national security.

The Attorney-General does not take that decision; he has a different opinion about the case. His opinion is that not only is national security an important issue, but that the prosecution will not succeed, because he has a different interpretation of the law. Why is it the Attorney-General twice took the decision and the director once? What makes a difference in these decisions? This comes back to the vagueness of the idea of superintendence. That term cannot be the basis in the future of the relationship between the Attorney-General and the director of the DPP. We need far more clarity.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

I too think that the term "superintendence" is vague, but I suspect that the Shawcross exercise was carried out in 2005, it displayed that the only concerns were commercial interest, and therefore the Attorney-General had no advice to offer to the director of the SFO. In that sense, he did decide that nothing should interrupt the prosecution or investigation. Again, clearly, the issues raised about national security cannot have been so compelling that they required the Attorney-General, in his view, to give advice to the SFO on the second occasion either. Therefore, rightly, as the hon. Gentleman says, he decided that the prosecution should go on, but in both cases I think that what he decided was not to give any advice to the director of the SFO. But on the third occasion, he took the decision to do that, and it is at that point that the decision has to be made by the director of the SFO. That is probably what happened, and that is probably nothing other than a very sensible position, and the right one, bearing in mind the nature of the Shawcross exercise, and that that advice is or is not transmitted to the decision maker.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

That is a possible interpretation of what happened. It raises the question of what precisely changed the Attorney-General's mind, which was the question I sought to ask early. We still do not know what happened there. It comes back to the point, with which I am glad the Solicitor-General agrees, that "superintendence" is too vague a term to describe this relationship. We need far more specificity about how the prosecution authorities and the Attorney-General relate to one another.

My third point has been raised on a number of occasions already, and it is the definition of corruption. When hon. Members say no crime has been committed, or there is no proof of any crime, they do not quite understand that the problem here is a legal one, not a factual one. I think that everybody knows what happened—that money moved from the Saudi Government to Saudi officials via somebody else. The question is whether that was a crime. The Attorney-General and the director disagreed about whether that was a crime under existing British law. It is an interesting question, and one that should have been tested in the courts, rather than have been decided abruptly in the way that the Attorney-General might have decided had he been taking the decision, although we are told that he did not.

But there is a further question on this point. If one reads the OECD treaty and the Corruption Bill, which has passed through all its stages in the other place, there is not much doubt that the events that everyone knows took place are criminal. The question that I want to ask the Government is simply this. The Solicitor-General now says that she is waiting for the Law Commission to report and that she looks forward to a Bill being brought forward, but is it her view, not that that sequence of events is criminal, but that it should be criminal?

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Photo of David Borrow David Borrow Labour, South Ribble

The hon. Gentleman has just said that the sequence of events is criminal. Does he mean that the sequence of events would be criminal if the law were amended on the basis of the Lords Bill, or that it is criminal on the basis of the law that obtained at the time that the actions took place?

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

That raises profound questions that are before the courts about the status of international law in English law. If one follows the definition in the treaty, one would conclude that the actions were unlawful. If one follows the definition in the draft Bill, which is not yet law, one would conclude that the actions were unlawful. As to whether the actions were unlawful at the time depends on how one interprets existing law, and on that there was a profound difference of opinion between the Attorney-General on the one side and the director of the SFO on the other. Ultimately, that is a question that should be decided in the courts, not on the Floor of the House of Commons.

The fourth issue is the Government's attitude towards international law. One of the most disturbing things to come out of the Government's statement of their case in the judicial review is that they are now saying to the court in that case that even if the treaty were to mean that the case should not have been stopped for reasons of national security in those particular circumstances, the Government would still have gone ahead and stopped the prosecution, even in violation of international law. That is an extraordinary position for the Government to take. It might well be that they are forced into that position by tactical considerations in the litigation, but nevertheless that is the position that they have adopted. It is not a position that the Government of a civilised state should ever adopt.

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Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Jack Straw, Lord Chancellor), Ministry of Justice

Who has said that, and where has the hon. Gentleman got that information from?

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

The statement comes from the Government's summary grounds of resistance on behalf of the defendant in their judicial review case where Corner House Research and the Campaign Against Arms Trade are bringing proceedings against the director of the SFO and BAE Systems. If the hon. Gentleman wants to know the names of the lawyers, I will send him the entire document.

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Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Jack Straw, Lord Chancellor), Ministry of Justice

Who said that? I do not want the documents: I want to know who said it on behalf of the Government.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

I shall send the hon. Gentleman the documents and he can work it out for himself. [Interruption.] I do not think that it is right to read out the names of the Government's lawyers on the Floor of the House, although I shall if he carries on asking that question.

Let me just move on to my final point. [Interruption.] I do know. Okay, I shall now read out the names of the Government's lawyers. They are Philip Sales QC, Hugo Keith and Karen Steyn, and obviously the instructing solicitor was the Treasury solicitor.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

No, I shall not give way to the hon. Gentleman. He never makes any sense, and he does not allow the debate to continue on any rational grounds.

Let me move on to my final point, which is not a legal point, but a point about the decision that had to be taken. I disagree with those of my colleagues who think that the decision was easy. It was very difficult, but nevertheless, the wrong decision was made. The question is: what should a country do if there is a threat to its national security from the very people who are being investigated for illegality? I do not deny, as some people might, that the threat was real; the question is what does one do if that is the situation that one perceives.

The Government gave way to the threat, but the other argument is that doing so helps the fight against neither terrorism nor corruption. If that is what happened in this case, it sends out a very dangerous signal. In the long run, there is a greater threat to national security in giving way to such a threat than in resisting it.

Interestingly, Mr. Wardle told the Constitutional Affairs Committee that from the documents that the director was shown, Sir Richard Mottram did not take that risk into account. Again, it can be seen in Mr. Wardle's evidence to the Committee that it was assumed that none of this would ever come out, and that the whole thing could be swept under the carpet. If that is true, the Government have added incompetence to their weakness of will.

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Photo of Vera Baird Vera Baird Solicitor General, Law Officers' Department

I am not entirely sure that I follow the hon. Gentleman, but I think that he is suggesting that we should ignore the possibility of a serious threat to public safety in this country and in the middle east because it comes from the quarter being investigated; and that even though we understand the centrality of Saudi Arabia in our counter-terrorist intelligence activities, we should make some bold swashbuckling stand against them like Braveheart, notwithstanding what such action might do to people in this city and throughout the UK.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

There are two points: first, what was done was wrong; secondly, it was a mistake. It was wrong because it is wrong to give in to such blackmail. It was a mistake because in the long term, giving into such pressure is a greater threat to national security.

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Photo of David Borrow David Borrow Labour, South Ribble

I am just trying to probe the issue. On the basis of the information that the hon. Gentleman has, he has come to a view that Mr. Wardle's decision to halt the inquiry was wrong. However, the hon. Gentleman does not have access to all the information that Mr. Wardle had when he reached that decision, because the hon. Gentleman has not had those meetings with the ambassador to Saudi Arabia that were so crucial to Mr. Wardle reaching that decision. Is the hon. Gentleman absolutely confident that whatever the circumstances and whatever additional information might be available, he would still come to the same view that he holds now?

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice

Since I said some minutes ago that one of the big problems with this issue is the lack of openness and scrutiny of the evidence, of course I cannot be absolutely confident. However, even accepting the uncertainties, there is a case for saying that the wrong decision was made.

Finally, if one looks at the events in the round, there is an implausibility about them, to use the word that the Solicitor-General picked up on. The implausibility is this: would a country that is our ally in the fight against terrorism take the actions that are currently being attributed to it and threaten the withdrawal of co-operation in the fight against terrorism, because of financial embarrassment? It might be true that they were persuaded that there would not be any effect on their reputation, because it was thought—perhaps on the Government's assurance—that none of this would come out. The other, more disturbing possibility, however, is that the Saudis are perhaps not the principal villains of this piece, and that the Government's main concern is not to conceal wrongdoing by foreign Governments or officials, but to conceal their own incompetence and wrongdoing in this country.

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester 6:26 pm, 16th July 2007

I shall vote for the motion tonight and I voted for a similar motion in February. Almost all the points that I wanted to make have been made by the hon. Members for Twickenham (Dr. Cable) and for Cambridge (David Howarth), and the latter made some points, particularly his legal points, I had not thought of. I shall therefore make one specific point and then draw some general conclusions.

In this case, the investigation was brought to an end as a consequence of information provided in a memo, as we have heard again today, prepared by Richard Mottram for the Serious Fraud Office, and as a consequence of a series of oral briefings by the UK ambassador to Saudi Arabia. Robert Wardle provided the Constitutional Affairs Committee, on which I serve, with details of that information when he appeared before it. In this House, none of us, except the Solicitor-General, is in any position to judge whether the correct decision was taken on the basis of that information. We have not seen the memorandum, and we have not heard what the ambassador said. However, the Intelligence and Security Committee can see the material, and it can also summon witnesses, including the ambassador. That is why I strongly support the view that that Committee should consider the matter, and why I suggested that it investigate and report back to Parliament. That is what it exists to do.

I encouraged Mr. Beith, the Chairman of the Constitutional Affairs Committee, to write to the Intelligence and Security Committee, on which he also serves as a member, asking it to initiate that investigation. We have not yet had a reply. On the basis of such an investigation, we might receive some reassurance about whether the decision was taken on a reasonable interpretation of the evidence. I welcome the Solicitor-General's remarks about the need to strengthen parliamentary scrutiny of the security services and the information that they provide.

I have the same intuitive doubts about the security arguments as the hon. Member for Cambridge. It strikes me as implausible—to use a word that, although widely ridiculed in the House, is a perfectly reasonable expression of something short of certainty—that the Saudi Arabians would want to cut off their noses to spite their faces. They must realise that if they were to cut off co-operation with us, we might be less keen to supply them with information collected here, which is valuable to them in dealing with al-Qaeda domestically.

Incidentally, I am disappointed that the Quadripartite Committee, which was specifically set up to consider such issues in the light of legislation put on the statute book five or six years ago, has failed to announce that it will take a look at the issue—I hope that someone is listening to that remark.

My remaining quick remarks relate to a number of suggestions made by Mr. Borrow. He has strongly implied that the decision not to go ahead with the investigation is justifiable on commercial grounds. Mr. Spellar made that point in February, and my hon. Friend Mr. Howarth has made a similar point. Those hon. Members have repeatedly sought to justify the decision not to take the matter any further on the grounds that jobs—in particular, jobs in their constituencies—are at stake. I understand that hon. Members who have constituencies where jobs are at risk want to make those points, but that does not constitute an argument for not investigating the matter further.

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Photo of David Borrow David Borrow Labour, South Ribble

My argument is not that the investigation should be halted because of the number of jobs at stake; it is that because the investigation has been stopped on proper and appropriate legal grounds, those who object to and disagree with the decision are putting employment in the defence industry at risk by continuing to challenge the decision and publicise their opposition to it.

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

In saying that, the hon. Gentleman is also lining up for criticism the director of the SFO, who has made it clear that he is disappointed that the investigation is not proceeding. In any case, a number of other hon. Members have made the point to which I have alluded and which the hon. Gentleman has qualified—it is all available in Hansard.

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

In view of the number of interventions that the hon. Gentleman has made that added nothing, I am reluctant to give way, but on this occasion I will do so.

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Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Jack Straw, Lord Chancellor), Ministry of Justice

I thank the hon. Gentleman for his extreme generosity. A number of hon. Members were concerned about the impact on jobs, but that was only a collateral issue. The key issue is clearly national security. The longer that Liberal Democrat Members and people such as the hon. Gentleman pursue this media campaign, the more damage will be caused not only to jobs, but, if the Liberal Democrats and the hon. Gentleman have their way, national security.

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P

I find Mark Hendrick's contributions to this debate to be bizarre as he consistently cited BAE's role as a major employer and only at this juncture does he cite national security. He looks very accident prone.

Submitted by Paul Dawson

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

It is important that we weigh in the balance the arguments on national security by asking the Intelligence and Security Committee to consider them and to report to Parliament, and I hope that it will do so.

The hon. Gentleman described the jobs argument as "a collateral issue", but either there are or there are not commercial considerations that should be taken into account. If it was right to take those considerations into account—I do not agree that this is the right approach—I have not seen a thorough assessment of the value for money of that huge deal. I do not know the extent to which the British taxpayer has subsidised the deal, and I do not think that anyone present in the Chamber knows, either.

Nor am I aware of any estimate of the commercial cost of the risk that is sitting on the Export Credits Guarantee Department's books as a consequence of the deal—if anyone has seen an estimate, I would be interested to hear about it. The ECGD's accounts are still, after many years of pressure for reform, opaque. In my view, when a default comes through on the ECGD, it should score not against the public sector financial deficit, but as public expenditure against the budget of a particular Department. That would allow us to compare the value of that credit guarantee against other forms of public expenditure in which that Department is engaged. We need much more transparency in the work of the ECGD, because deep in the recesses of how the arms industry is conducted lies a worrying lack of transparency.

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

If the hon. Lady will forgive me, I will not do so on this occasion, because, first, I am about to conclude and, secondly, the winding-up speeches are about to begin.

I want to finish the point about jobs. I have mentioned the ECGD and the fact that we do not know what other subsidies financed the deal. One thing that we learned in the 1970s is that propping up jobs by Government subsidy—throwing public money at them—is always a counter-productive waste of money in the long run, which is why such subsidies were largely wound up in the 1980s. The arms industry has, to some degree, succeeded in exempting itself from the full pressures of the commercial marketplace, which concerns me.

Finally, has this issue now been put to bed? I think not, for two reasons. First, it is likely that the US authorities will pursue the matter and that the damage to BAE Systems will persist, which will in turn continue to harm Britain's reputation. Secondly—this point has not been raised in today's debate—the security considerations that led to the decision may change. Are we sure that the Saudi regime will always maintain its threat to close down security co-operation if the investigation is reopened? If and when there is a shift in the Saudi position on the deal, which has many years to run, the SFO is at liberty to reopen the investigation. Indeed, in response to a question from me on exactly that, Robert Wardle said in the Committee that his office will keep under review the assessment of the national security risk.

The issue has not finally gone away, and it has not finally been put to bed. It is a matter for debate whether we are in a better position than we would have been had the investigation been allowed to continue. What have we really gained by terminating the investigation? Well, we have gained some time. Are we more secure as a result? It has been asserted that we are, but I would like the Intelligence and Security Committee's reassurance on that point. Are economic benefits being secured? I would be very surprised if the balance of benefits and costs of the deal as a whole is clear-cut, but, again, I do not have the information—the fact that the PAC report has not been published makes such a judgment more difficult. There is also the question of damage to reputation, where nothing has been gained and almost certainly quite a lot of damage has been done. Overall, did the Government make a mistake? It is difficult to tell, but I will not form my judgment until an Intelligence and Security Committee investigation has taken place and we have debated it.

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P

Some very valid points- the UK arms industry has no right to expect public subsidy and the activities of the Export Credit Guarantee department should be brought out into the open.

Also, BAe/the UK Government should be fearful of a US investigation. Under the US system it is much less easy for senior politicians to halt legitimate investigations.

Submitted by Paul Dawson

Photo of Michael Moore Michael Moore Shadow Secretary of State (Foreign Affairs) 6:38 pm, 16th July 2007

It is a pleasure to follow Mr. Tyrie, who made many points that I might otherwise have raised. A relatively short period of the debate remains, and I will make sure that the Minister gets plenty of time to cover the main issues and some of the points that the Solicitor-General did not address earlier.

I want to pick up some of the contributions to the debate. My hon. Friend David Howarth set out a forensic examination of the Attorney-General's role. I am disappointed that, unlike the hon. Member for Chichester, Conservative Front Benchers and others will not support us in the Lobby in a few moments' time. However, we welcome the fact that the Conservative spokesman, Mr. Djanogly, set out his party's concern about many of the issues and the fact that procedures need to be tightened. He was also right to spend a bit of time on the issues arising out of the deal with Tanzania—a matter that my hon. Friend Norman Lamb has pursued doggedly for a number of years and is still asking questions about.

As well as the speech by Mr. Borrow, there have been several interventions in which Members have understandably, and rightly, considered the economic aspects of this and the jobs that they believe may be at stake. The hon. Member for Chichester set out some of the genuine concerns that we as parliamentarians must raise about the use of public money for some of these contracts. It is unfortunate if those of us asking questions are to be tarred as being somehow against jobs, because that is far from the truth. However, I do not dispute the right of the hon. Member for South Ribble and others to make the case for their constituents.

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Photo of Lynne Featherstone Lynne Featherstone Shadow Secretary of State for International Development, Shadow Spokesperson (Communities and Local Government)

Given the very limited number of players in the field capable of supplying massive arms contracts, does my hon. Friend agree that if there were a strong international will in all countries, from Governments down to suppliers, to cut out corruption, the business would still be there but costs to businesses would be cut because corruption would be cut?

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Photo of Michael Moore Michael Moore Shadow Secretary of State (Foreign Affairs)

My hon. Friend raises an important point about the importance of international agreements and arrangements—a matter that has been discussed in the course of this debate and that we must keep scrutinising in this House and elsewhere.

We have not questioned the integrity of officials or of right hon. and hon. Members. We have asked questions, legitimately, about the roles that certain individuals have played, but we have not questioned their integrity. However, we do question the integrity of the processes by which we in this place are able to scrutinise the Government, and therefore make no apology for the fact that we have returned to this subject less than six months after we last introduced a debate on it. The issues are of such magnitude, and Parliament's need to scrutinise them is so serious, that we are happy to have provided another rare opportunity for debating them.

Several issues have been raised in the past couple of hours. My hon. Friend Dr. Cable, who set out our case at the start of the debate, advanced the arguments relating to al-Yamamah in detail, so I will not repeat them in the brief time available to me. On the other investigations, I am grateful to the Solicitor-General for setting out a summary of where she understands them to be going. She has dismissed all our inquiries as mere innuendo, in which respect she follows her predecessor, who used a similar tactic in the previous debate. For the purposes of this debate, let us accept that on the Government Benches attack is the best form of defence.

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Photo of Greg Mulholland Greg Mulholland Shadow Minister (Education)

Does my hon. Friend recognise a wider point concerning the Government's astonishing arrogance in not acknowledging the real shame that this has brought on the country? To give one example from the foreign press, The Hindu said, on 11 June:

"What is more shameful, is that it is being defended by a government that is supposed to be spearheading a campaign against corruption in developing countries and never tires of lecturing African and Asian leaders."

Is it not true that damage is being done and that the message is, "One rule for the rich nations and one for the poor"?

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Photo of Michael Moore Michael Moore Shadow Secretary of State (Foreign Affairs)

My hon. Friend raises an important issue about Britain's reputation on the world stage—one that the Foreign Affairs Committee highlighted in its recent report on human rights, which concluded:

"the Government's decision to halt the inquiry into the al Yamamah arms deal may have caused severe damage to the reputation of the United Kingdom in the fight against corruption."

In their response to the report, the Government asserted that the Organisation for Economic Co-operation and Development working group "welcomed the UK's openness" in their meetings with the group. Well, yes, it would. However, their response plays down the group's remaining concerns, and they have not fairly represented the seriousness of the views held by the OECD. Let us remember that following the March 2007 meeting at which the SFO inquiry was discussed with the UK representatives, the working group stated that it

"reaffirmed its serious concerns about the United Kingdom's discontinuation of the BAE Al Yamamah investigation and outlined the continued shortcomings in UK Anti-Bribery legislation. It urged the UK to remedy these shortcomings as quickly as possible and decided to conduct a further examination of the UK's efforts to fight bribery."

That is where we stand in the international dock. Our reputation as a country is surely at stake, as this investigation makes clear.

Perhaps more immediately, our relationships with key partners are also at stake. In this regard, we all understand the importance of our relationship with Saudi Arabia. Beyond the economic significance of our links in oil, industry and services, we have common interests in the safety of the region and the development of a middle east peace plan. Nobody can deny the significance of the ties in relation to security co-operation. In our February debate on this matter, the Minister for the Middle East, whom we are pleased to see still in his place, underlined that with appropriate conviction:

"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".

After giving an appropriate example of the links between Saudi dissidents and al-Qaeda, he said:

"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."—[ Hansard, 7 February 2007; Vol. 456, c. 907.]

I agree with him wholeheartedly on that. He rightly went on to remind us that UK citizens have been the victims of terrorist attacks in the region and that British co-operation with the Saudis is therefore critical. However, just before that section of his speech, he pointed out the needs of the Saudis themselves:

"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."—[ Hansard, 7 February 2007; Vol. 456, c. 906.]

The pressures on the Saudis are enormous, and it seems self-evident that they need our co-operation at least as much as we need theirs.

That issue has not been properly explained, and I hope that the Minister will take the opportunity to do so in a few moments. How formal were these warnings from the Saudis? Were not the Government outraged when, out of the blue, we were suddenly being told that important security co-operation that matters to both our countries was to be withdrawn merely on the basis of a particular SFO inquiry? Has the Foreign and Commonwealth Office used every available channel to protest about these crude tactics by an important partner? If it has, and it has been unsuccessful, what on earth does that now say about our relationship with the Saudis that those proceedings did not work? Separately, we can attack this by asking how credible those threats were, and what discussions there were at that time about the loss that the Saudis would suffer from breaking those links. I hope that the Minister will be able to tell us what reappraisal has been forced on the UK on the strength of these experiences and what that now says about our broader relationship with the Saudis.

This issue has spilled over into the Atlantic. We now know that the Ministry of Justice is carrying out its own investigation. I welcome the fact that the Solicitor-General said earlier that the Home Office has received a formal request and that that co-operation is proceeding. What further discussions are taking place with the FCO or the Ministry of Defence on what part they are going to play in this?

The sale of arms will always be secretive, by its very nature, and it is necessarily so. Great issues of national security are at stake and the economic value of arms exports is crucial to us as a country. Equally, our relationships with partners to whom we sell aircraft, tanks or whatever, matter greatly. Of course, there are separate significant issues relating to national security bound up with those relationships. We cannot ignore any of that, but nor should we in Parliament ignore our responsibility to scrutinise such issues, and to ensure that Government policies are right and their implementation appropriate.

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Photo of Kim Howells Kim Howells Minister of State, Foreign & Commonwealth Office 6:50 pm, 16th July 2007

Despite the subject of the debate, which is very wide-ranging—"The investigation of alleged corruption overseas"—much of it has focused on the decision by the director of the Serious Fraud Office to drop the fraud investigation into BAE Systems. There is only so much I can add to that discussion, and my hon. and learned Friend the Solicitor-General has dealt carefully and in great depth with the events that led the director to make his decision. As my hon. and learned Friend said at the start, that decision was made by the director alone, although—we have always been very open about this—representations were made to him about the need to safeguard national and international security.

It is difficult to imagine what alternative path he, and we, should have taken. The Government were given good reason to believe that there is a real and present danger to their security and intelligence co-operation with a country that plays a vital role in helping us to ensure the safety of our citizens from threats posed, among others, by al-Qaeda terrorism. I have been working with our middle eastern partners for long enough to assure the House that the Kingdom of Saudi Arabia is a key partner in tackling al-Qaeda threats to the lives of British nationals and other civilians at home and abroad.

It would have been wholly irresponsible of us to have ignored that information. It would have been wholly wrong not to make the Serious Fraud Office aware of it, and it made a decision based on that evidence. It was not an easy decision, and I do not think that anyone here today claimed that it was. Of course it was not; the investigation was not begun with the intention of calling it off further down the line. However, on balance, it was the right decision, and we are confident that it was compatible with the OECD convention. It has been implied this afternoon that we have set a precedent by the decision of the director, Robert Wardle. We have not. Faced with the same set of circumstances and the same evidence of the implications for national and international security, we would make the same representations to the SFO. The idea that there is now a carte blanche for companies from this country to bribe at will is patently absurd, and I urge colleagues to think hard before throwing the sort of allegations around that imply otherwise—some of which we have heard today.

As my hon. and learned Friend the Solicitor-General has told us, the SFO is pursuing other investigations vigorously, including some, as she reminded us, into BAE Systems. We have made it quite clear that no company or individual is above the law. We expect high standards of business conduct, and compliance with the law of the United Kingdom and that of the countries in which they operate, from all UK defence companies. We expect those high standards to be observed in any future contract in respect of defence sales to Saudi Arabia. We would expect the high standards operated by British companies to be recognised and respected by Members of this House from all parties.

Companies such as BAE Systems are very much aware that their world-leading products and services need the benefits that a good reputation bring in international sales. They also know, and it is a sharp reminder to all of us, that convictions for corruption in this country can mean a seven-year jail sentence and/or an unlimited fine. That should focus everybody's minds.

The Government are second to none in the transparency and rigour of their regulation of arms exports and dual-use goods. I remind the House that before manufacturers are allowed to export, they submit applications for export licences to the Department of Trade and Industry, as it was. Hon. Members will excuse me if I cannot remember what the new Department is called —[ Interruption. ] I believe it is DBERR—the Department for Business, Enterprise and Regulatory Reform. The Department consults Whitehall—the Foreign Office, the Department for International Development and the Ministry of Defence—to check whether an export is legal and consistent with the United Kingdom's obligations. We abide rigorously by the consolidated EU and national arms export licensing criteria. The earlier implication, therefore, that we are somehow not up to the mark internationally, is completely spurious.

Since the debate is—nominally at least—about the wider issues of corruption and bribery, it is worth reminding ourselves of the Government's record on the issues. The fact is that in the past 10 years, the world has moved on a great deal from a time when many powerful Governments and businesses turned a blind eye to practices such as bribery and kickbacks. There is now a global coalition of non-governmental organisations, consumers, Governments and companies helping to put the frameworks and mechanisms in place to stamp such practices out. The United Kingdom's role in that shift has been considerable, involving activities and alliances that are designed to root out corrupt behaviour.

We are pushing for the implementation of the United Nations convention against corruption. The provisions on improving international co-operation and on asset recovery are particularly important. We are implementing the third European Union directive on money-laundering to make it even harder to move criminal money, including looted assets, through our financial system. The Department for International Development has put £6 million into strengthening the UK's law enforcement capacity to investigate allegations of foreign bribery and the laundering of corrupt assets by political elites.

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Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

One of the more constructive comments to come out of this debate was that of the Solicitor-General on the need to strengthen the law on bribery and corruption. Would the Minister give us more of an idea of the timetable for that legislation?

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Photo of Kim Howells Kim Howells Minister of State, Foreign & Commonwealth Office

As my hon. and learned Friend the Solicitor-General told us earlier, this is an important matter. She accepted some guilt for slowing the process because she wanted to be vigorous in the examination of proposed legislation. Like the hon. Gentleman, whose views I very much respect, I would like to see the process move more quickly than it has, and I hope that what we have heard during the debate helps to do that. I understand that the pre-legislative scrutiny Committee took a lot of time over the matter, and did not much like the shape of the proposed legislation. It has to take another look at it, but I very much agree with the hon. Gentleman; it is a priority, and it must go ahead quickly.

We have been working with Transparency International on funding elements of a major anti-corruption programme in south Asia, focusing on improving transparency in public procurement. Of course, it is this Government who have shown long-running leadership on the extracted industries transparency initiative. We were involved with the beginning of the Kimberley process to stamp out "conflict" or "blood" diamonds, and that has brought results. The Extractive Industries Transparency Initiative is widely recognised as the international standard for the management of public revenues from oil, gas and mining.

Our support for the work of the Nigerian Economic and Financial Crimes Commission has helped it to become the most successful anti-corruption body in Africa, reporting more than 150 convictions and the recovery of $5 billion since 2002. There is also the Kenya textbook project, where we transferred funds to individual school bank accounts, so that money was more likely to go towards education and less likely to be siphoned off along the way.

I believe that probably no Government in the world have a better record than ours on fighting bribery and corruption world wide. It is damaging nonsense to claim that the Serious Fraud Office's decision to discontinue a single investigation because of our concern to safeguard national and international security has undermined all that work.

Transparency International's latest independent analysis says that the United Kingdom ranks as the least corrupt of the G7 countries. I am not sure whether that is damning with faint praise but it says something. We are not complacent about the challenges in the United Kingdom or abroad, and we will take them up with energy and determination.

Dr. Cable made his usual statement at the beginning of the debate. He is, of course, a great master of dubious poetic phrases and he has a resilient mud-throwing arm. Today, he spoke about money, and we heard that the Government's money is not allocated, spent or exchanged but "swills around". He is a great expert at diving into the swill tub. He throws its contents at any convenient target, regardless of the impact of his efforts. This afternoon, he threw some at Sir Richard Mottram's reputation by implying that he is part of a conspiracy that dates back to the al-Yamamah arrangements. He did that despite the fact that Sir Richard is one of our most distinguished and respected public servants, who has played a crucial role in helping this country reconfigure and strengthen our defences against the real and present danger that terrorists within and beyond our shores pose to the United Kingdom.

I therefore hope that hon. Members will vote against the absurd Liberal motion and support the Government amendment.

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

The House proceeded to a Division.

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The House having divided: Ayes 46, Noes 284.

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Division number 183 Opposition Day — [17th allotted day] — Alleged Overseas Corruption

Aye: 46 MPs

No: 284 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

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Question accordingly negatived.

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

The House proceeded to a Division.

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Mr. Deputy Speaker:

I ask the Serjeant at Arms to investigate the delay in the Aye Lobby.

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The House having divided: Ayes 266, Noes 45.

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Division number 184 Opposition Day — [17th allotted day] — Alleged Overseas Corruption

Aye: 265 MPs

No: 45 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

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Question accordingly agreed to.

Mr. Deputy Speaker forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House supports the Government's stance against international corruption; welcomes the action it is taking to tackle it; and recognises that the decision to discontinue the Serious Fraud Office (SFO) investigation into BAE Systems plc and Saudi Arabia was taken by the Director of the SFO alone for reasons of national and international security.

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