Serious Fraud Office’s BAE investigation sparks concern over future of BAE contracts

The latest on the BAE Systems fraud case.

The Serious Fraud Office’s looming recommendation to the Attorney General that BAE Systems be prosecuted for bribery and accounting falsities raises serious questions for the future of UK defence procurement. BAE has denied all wrongdoing. The investigation, focusing on large scale bribery with regard to major arms deals and defence manufacturing programmes in Tanzania, South Africa, Romania and the Czech Republic, was described by the BBC’s Business Editor Robert Peston as “the most explosive investigation into a British company that I have ever encountered.”

Speaking on Newsnight last night, Liberal Democrat MP Norman Lamb, who has extensively tabled parliamentary questions on BAE’s business practices, said BAE stood accused of “paying very substantial sums of money to bribe officials to secure deals” and cited the 2001 Tanzanian air traffic control deal, sanctioned by former Prime Minister Tony Blair over the strong objections of then Development Secretary Claire Short. Lamb said: “The argument at the time was that simply too many British jobs were at stake.”

Key questions in the scandal revolve around the extent of government knowledge of BAE’s practices, particularly in the light of the Blair government’s decision to curtail the earlier investigation into the Al Yamamah arms deal between BAE and Saudi Arabia and the potential exposure of the British taxpayer in funding the alleged bribes. Furthermore, the scandal raises critical national security questions as to the sense and security of dealing with a major industrial partner who is alleged to be both ethically and legally compromised.

At a time when BAE Systems is looking to the tax payer for further government funding for major defence contracts such as the proposed renewal of Trident, demands for greater transparency and hesitancy over handing over further taxpayer pounds to a company facing such serious charges are sure to increase, as are specific calls for change to the way the entire defence industry does business.

Potential models for future reform of Britian’s defence industrial structure would include adoption of the Organisation for Economic Cooperation and Development’s anti-bribery working group’s proposals for tougher UK anti-bribery laws – indeed, one of the OECD’s UK specific recommendations has been to “ensure that the Attorney General cannot give instructions to the Director of the Serious Fraud Office about individual foreign bribery cases, and eliminate the need for Attorney General consent to prosecutions of such cases.”

The call has marked relevance given that should the SFO recommend prosecution the UK Attorney General still possesses the power to disregard that recommendation, although this power is being currently being phased out.

In the long term, the defence industry should look to emulate the transparency efforts of reformers and innovators in other areas like the Extractive Industry’s Transparency Initiative or that of Publish What You Fund, the global campaign for aid and development transparency which advocates for comprehensive aid transparency through the timely, accessible and comparable reporting of foreign assistance monies.

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