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On 1 October, the Serious Fraud Office (SFO) announced that it was taking steps to prosecute BAE Systems in relation to arms deals in Eastern Europe and Africa. This move again places the spotlight on the activities of BAE, Britain’s largest arms company.

BAE is alleged to have paid bribes in the form of commissions to “advisers” to clinch sales. The SFO began investigations several years ago into BAE’s alleged corruption and false accounting in the Czech Republic, Romania, South Africa and Tanzania, but progress was slow. The new SFO director, Richard Alderman, is reported to have gone through the case files and allocated extra resources to the investigations.

It was widely reported that the SFO had given BAE until 30 September to accept a plea bargain with a fine, or face criminal prosecution. The deal was not done, apparently because of the size of the proposed fine.

SFO 0, BAE 1

When the SFO got access to Swiss bank accounts relating to BAE’s dealings with Saudi Arabia with regard to the “Al Yamamah” arms deal of the mid-1980s, the Saudi government threatened to stop intelligence and other cooperation with the UK unless the investigation was halted. In December 2006, Prime Minister Tony Blair did just that, ordering the SFO to drop the investigation.

In January 2007, Campaign Against Arms Trade (CAAT) and Corner House announced that they would jointly challenge the decision to drop the SFO investigation through a judicial review. On 10 April 2008, the High Court ruled that the SFO Director had acted unlawfully by stopping the investigation - a decision later overturned by the Law Lords.

What now?

A BAE conviction in the UK or elsewhere could spell huge reputational and financial damage. Tough regulation by the EU and US authorities could stop BAE bidding for lucrative military contracts. While denying any wrongdoing, BAE says that the SFO is concerned with “historical matters”. The next step is for the SFO to pass the files to the attorney general who will make the final decision on prosecution. At the time of going to press, it is unclear whether the SFO will hand over all or some cases, or agree a plea bargain with BAE.

Topics: Arms trade