The real catalyst for the Bribery Act being drafted from 2007 to 2010, and eventually passed in April 2010, was the acute embarrassment caused to the United Kingdom when Tony Blair’s government, acting through the then Attorney General, Lord Goldsmith, blocked the 2006 Serious Fraud Office investigation into allegations of corruption by British Aerospace of a Saudi Royal who was also a member of the Saudi government.  The OECD and Transparency International, together with other international bodies, were extremely critical of the Blair government’s failure to investigate and prosecute the significant alleged acts of corruption.  Mr Blair justified his decision to block the investigation on the grounds that the Saudi government was threatening to withdraw from an intelligence sharing agreement with the United Kingdom in relation to information concerning terrorism.  Whilst this may well have been a significant motivating factor in his decision making process, Mr Blair would also have been extremely conscious of the fact that Saudi Arabia is one of Britain’s most significant trading partners.  To some it looked like he had sold the UK’s reputation.

So one might take the view that “here we are again” five years later more allegations of corruption; involving a Saudi Royal again; the only difference is it is a UK subsidiary of EADS/GPT, on this occasion, and not British Aerospace.  Presumably the Cameron government is faced with the same sort of dilemma, with similar pressure from the Saudi government.

I have previously blogged on this story in a post dated 8 June 2011, although this new investigation was not widely reported in the British media at the time.

Transparency International UK made a press release on 10 October 2011 stating that “…Transparency International UK is calling on the Government to support a full investigation by the Serious Fraud Office (SFO).  The UK Attorney General is reportedly deliberating over whether the SFO should continue to investigate allegations that GPT made illicit payments to the Saudi Royal Family in order to secure a contract worth £2 billion.  The Attorney General’s decision will face a high level of international scrutiny because the UK’s anti-corruption record is currently under review by the United Nations, the Council of Europe and the OECD.  Under Article 5 of the OEC Anti-Bribery Convention, to which the UK is a party, a state cannot allow political, economic or diplomatic considerations to interfere with the investigation and prosecution of foreign bribery cases.  This echoes the BAE Systems case in 2006, when the Blair government caused an international outcry by forcing the SFO to drop an investigation into allegations of bribery in the Al Yamamah UK-Saudi defence contract…”  The executive director of Transparency International UK, Mr Chandrashekhar Krishman then goes on to say “…we would expect EADS, as leading members of the international defence industry’s own anti-corruption initiatives such as the Common Industry Standards for Anti-Corruption and IFBEC, to cooperate with the SFO and undertake a thorough internal investigation into these allegations…it is imperative that the Government sticks by the international rules and ensures this investigation goes ahead”.

It is to be presumed that the Saudi government will try to play the intelligence sharing agreement card again, since it worked well last time, but if it does not, then the British government is clearly on the horns of a dilemma, for a decision to stop the SFO’s investigation would clearly be enormously embarrassing to the UK’s coalition government and damaging to the reputation of the UK as a whole on ethical standards.  On the other hand, given that the UK economy is in a parlous state and the government’s own finances are dire, to investigate and prosecute alleged defences in relation to the EADS/GPT contracts could be enormously damaging to Britain’s significant business relationship with Saudi Arabia.

Dominic Grieve, the current attorney general, will be receiving enormous pressure from all quarters from within his own government, from the Saudi government, from Transparency International, from EADS/GPT and who knows who else?  Who would want his job?

Curiously, this very significant news has not been widely reported in the UK media although it is in the Telegraph online on 9 October 2011 and on Indian and Iranian news websites.

As I previously blogged, the investigation by the SFO into EADS/GPT commenced as a result of report by a whistleblower, Lt. Col. Ian Foxley who claimed he had been sacked by GPT after informing the SFO that Saudi officials had been given luxury cars, jewellery and cash in return for business being awarded to GPT.

The Daily Telegraph reports that Lt. Col. Foxley’s evidence has subsequently been supported by a second whistleblower, who apparently corroborates the evidence already given to the SFO.

An additional interesting factor is the possibility that there may be a US angle to this corruption investigation.  This could arise either because the companies involved have some sort of business presence in the US or at its simplest is that a wire transfer took place through a US bank.  In any event, with defence manufacturer companies of this size it seems highly probable that the US regulators would have some involvement and that they would take a significant interest, particularly where they suspect that an American company may have lost out to a foreign bid as a result of corruption by a non-US company.  It seems likely therefore that either the Securities Exchange Commission (SEC) or the US Department of Justice (DOJ) would also be investigating these allegations.  Therefore, whatever Dominic Grieve decides about the SFO’s investigation, the US authorities may pursue EADS/GPT themselves.  This is what happened previously with British Aerospace.  The US authorities still pursued British Aerospace but did not, apparently, suffer the fate threatened to Mr Blair’s government by the Saudi government.  This could be of course because of the relative size and importance of the United States to Saudi Arabia as opposed to the much smaller United Kingdom (lets not forget the US soldiers based in Saudi Arabia).  It will be no surprise (to me anyway) if once again the rule of law is sacrificed to international politics and the demands of big business.

As regards the UK’s new Bribery Act 2010: Just to be clear, the alleged offences must have taken place after 1 July 2011.  Therefore this hot potato has no relation to the new Bribery Act itself as the alleged acts pre-date 1 July 2011 (but would be investigated/prosecuted under the old corruption law) but really the debate concerns the effect on the UK’s reputation as a vigorous enforcer of anti-corruption law and its general ethical reputation globally.

I will report back when there is more news.  Our best guess at the BriberyLibrary is that the intelligence sharing agreement reason will be trotted out again by the Attorney General as a reason not to pursue it and that this investigation will never proceed.  British jobs and foreign faces will be saved but British justice will take another body blow.

If this investigation doesn’t go ahead, then courageous whistleblowers like Lt. Col. Foxley will be much more unlikely to come forward, which is the reverse  of the situation for which the SFO had hoped.