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.

2 Responses to “Serious Fraud Office’s BAE investigation sparks concern over future of BAE contracts”

  1. Swagata

    Glad to see your covering this subject, especially since evidence provided by Clare Short suggests the deal was not just championed by Tony Blair but by Geoff Hoon and… Jack Straw.

    A shameful episode in British history is finally being examined. But the government is still blocking the Saudi deal. Here’s hoping that “British jobs for British workers” doesn’t take precedent over the basics in the third world like education and the rule of law.

  2. Jane

    We all know that all international arms companies are corrupt. I read a report some time ago written by the World Bank which suggest that pay offs and bribes in the arms industry amounts to $80b. I do not know how many jobs are involved in the UK but I believe it to be around 80,000. It is no wonder that the UK government supports the industry with procurement policy, tax subsidies, export credits and of course all the promotion we undertake from Prince Andrew to Ministers.

    My concern relates to the prosecution of BAE. I hate the immorality of arms trade but neither do I want to see a British Company suffer when other Governments fail to prosecute the same offences by their arms industries. It was widely reported that Jacob Zuma took huge bribes from a French company which enabled his native village to be totally rebuilt? I have not read that company being hauled before the Courts.

    Claire Short is speaking with her hat on relating to poorer countries purchasing expensive weaponry. Whilst I am sympathetic to her stance I do not think she has the ability to consider the wider picture which the former PM et al had to do. I am not awfully interested in Norman Lamb’s views either. The real world matters – not just the views of those sitting in Westminster who have never nor are likely to have to make a decision effecting some $9b trade (1998 figures) or 62% of world trade in arms which is the figure given for BAE.

    It is rather awful having to temper reality with philisophy – i suppose it is the real world.

    I am all for following any proposal which would make international arms trading more open. Perhaps we shouild look at why arms trade is excluded from all other trade regulations in terms of state support.

    Regardless of my personal revulsion I do not think it appropriate that a British Company is the only one to be hauled over the coals. Further, I am not hesitant in continuing to support BAE systems with taxpayers money. The last time BAE were in the news, the French were waiting in the wings with all sorts of goodies in the event of the Saudi government pulling out of a deal with BAE.

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