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7 Feb 2007 : Column 881
2.42 pm

Mr. Dominic Grieve (Beaconsfield) (Con): I congratulate the hon. Member for Twickenham (Dr. Cable) on presenting a debate on what is without doubt a very important issue. The question of the discontinuance of the Serious Fraud Office investigation, the role of the Attorney-General and the director of the Serious Fraud Office in doing that, and the consultation with Ministers before it took place are all highly legitimate issues for debate in the House. The fact that we have an opportunity to debate them is clearly of great value. I shall come back to that aspect of the matter in a few moments.

I hope that the hon. Member for Twickenham will forgive my saying this, but it is noteworthy that the Liberal Democrat motion was very widely drawn. It is also noteworthy that he did not raise some aspects of the motion at all in the course of the debate, which came as a slight surprise to me. There was no reference to the very important issue of the sale of the military air traffic control system to Tanzania, though that may be because the matter was extensively debated on a Conservative Opposition motion on 30 January.

More tellingly, although the motion calls for an inquiry into the circumstances of the SFO action, the hon. Member for Twickenham made no mention of it. That made me wonder whether his views on the matter were now so set in stone that he did not consider that any independent inquiry was needed in any event— [Interruption.] I hear reference made on the Liberal Democrat Benches to lawyers’ comments; the hon. Member for Twickenham will hear more of them in a few moments. As I listened to what he had to say and as I tried to conduct a reasonably objective analysis of some really serious matters, I started to have increasing worries about the way in which he was carrying his reasoning forward.

The hon. Member for Twickenham raised a number of issues about the initial principle of the al-Yamamah agreement. That seems a perfectly legitimate issue of debate. It is an old matter, going back to the 1980s and it was, of course, negotiated by a Conservative Government and, seeing that its provisions have been renewed, continued by a Labour Government. It is, by any showing, an unusual arrangement. It is unusual because it is a Government-to-Government agreement and because of the methods of payment under it, as it is partly paid for by Saudi oil—which is unusual in itself. It is a relationship package at a Government-to-Government level rather than an ordinary commercial agreement. That is perfectly clear. As such, when the hon. Gentleman said that he disliked the arrangements, he was raising a perfectly legitimate point, albeit one that is somewhat ancient history.

I come back to an issue that I raised with the hon. Gentleman when I intervened earlier. What was difficult to understand was how he succeeded—in a virtuoso performance—in conflating his dislike of the arrangements with the suggestion that it was economically disadvantageous. I must say that that was the first time that I had heard that suggested, and it was the point in his argument at which I began to think that I might not be inhabiting the same planet as him. I ask him about it again, as I hope there may be an opportunity to deal further with it in the summing-up. It is possible to argue that we should not have such
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relations with Saudi Arabia or that such Government-to-Government agreements are undesirable and should never be embarked on, but the suggestion that the agreement is economically disadvantageous for this country requires rather more justification than he was able to provide.

Equally, the hon. Gentleman did not deal at all—or at least he skated over—another important question of whether the agreement as a package was advantageous or disadvantageous for our national security and national interest. I hope that at some point we will hear from the Liberal Democrats whether they believe that the nature of the agreement and the building of relations with another state in the middle east—an area of instability—in the form that the al-Yamamah agreement has undoubtedly achieved is desirable or not. Some of the arguments that the hon. Gentleman went on to make must be viewed in that light, and we are surely entitled to know what the Liberal Democrats think of the basic principle of the security co-operation between the two Governments. As far as I can tell—I look carefully at my notes—that was entirely skated over. That may be convenient for the hon. Gentleman in characterising the Liberal Democrat approach of never committing to anything. [Interruption.] I look forward to hearing more about that.

Martin Horwood (Cheltenham) (LD): The hon. Gentleman talks about the economic benefits of the deal and the value of relations with Saudi Arabia. The Solicitor-General mentioned part of article 5 of the OECD convention on bribery, but is the hon. Gentleman aware that the rest of it reads:


Those considerations are not material—or they should not be material—to the dropping of the investigation.

Mr. Grieve: In one way, that could not have been better said. The hon. Gentleman is absolutely right, but that raises the question why the hon. Member for Twickenham started what I had hoped would be a focused debate on the discontinuance of the investigation with a peroration which included a number of completely and utterly barmy assertions to the effect that the agreement was, in fact, economically disadvantageous in the first place. Given that the hon. Member for Twickenham raised the matter, it is incumbent on other Members to debate it. It seems to be part of a total picture that the hon. Gentleman has tried to convey that I find slightly unreal.

Dr. Cable: May I repeat my point? If the documents on the 1980s were available, we would all be able to gain a better informed view of the economic and other benefits, but is the hon. Gentleman aware that the Treasury, the Bank of England, the Export Credits Guarantee Department and the Department responsible for energy at that time—and specifically, the hon. Gentleman’s former colleague, the then Mr. John MacGregor—all took the view that the agreement was highly disadvantageous?

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Mr. Grieve: Yes, I understand that, which is why I intervened to make the point that, as so often happens in the House, when decisions are made, some people say that they are a good idea and others say that they are a bad idea. However, we are now 20 years down the road, and my impression was that the hon. Gentleman was unable to come to the conclusion that this had been a financially disadvantageous package. That rather undermines the reasons for raising the issue in the first place. It rather coloured my view of the judgments that he went on to exercise on other matters.

To return to the point raised by the hon. Member for Cheltenham (Martin Horwood), I entirely accept that, on the question of the discontinuance of the SFO investigation, the economic advantage to this country cannot come into play. He was quite right about that. I want to turn to that issue now. When we remove the froth around it that I have tried to identify, we see that it is the main issue that the hon. Member for Twickenham wishes to debate. It is worthy of debate and of great importance. I had had very little reason to focus on the issue until shortly before the Attorney-General made his announcement in the other place and the Solicitor-General made the announcement on behalf of the Government here.

When someone tells me that they are going to announce the discontinuance of an SFO investigation, it seems incumbent on me to focus on the issues involved and to do the best I can to analyse whether the Attorney-General and the Solicitor-General are trying to pull the wool over Parliament’s eyes, whether it is an attempt at a sordid deception of the House, whether it is another example of the perpetration of systematic deceit of a serious nature from within the Government, or whether in fact the argument might have some force.

I accept that we do not know all the facts of the case. That is a very real issue, and one reason why it is legitimate to debate the matter. The hon. Member for Twickenham said that, as far as he could tell, payments made by BAE Systems to third parties under the al-Yamamah contract had been open and made with the knowledge of the Saudi authorities. All my inquiries have also suggested that that is the case. That raises some interesting legal issues.

The hon. Gentleman may properly argue that the complex nature of the al-Yamamah contract and the relationships between the Governments were of a kind that we should not have embarked on—or continued to pursue, as this Government have done. However, it is becoming clear to my mind—I am trying to apply a lawyer’s mind to the matter—that there is a considerable difficulty, because there does not appear to have been a criminal offence committed by anyone.

There might be other facts available to the SFO. Other issues might have coloured its decisions. Perhaps secret payments were made that we do not know about. However, the basic ingredients of corruption—hon. Members may go off and look this up in the book—involve someone paying secret commissions to the agent of the party with whom he is dealing, to encourage the agent to favour him with a continuing contract on behalf of the principal. That is the foundation of the offence. At times in the House we have raised—and will, no doubt, continue to raise—serious anxieties that certain companies might be doing that. Reference was made to France,
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where, I regret to say, there has been ample evidence that French companies have been corrupting the officials of foreign Governments on a serial basis for many years. That might be done in this country as well, in an international setting. I suspect that it was certainly done before the passing of the Anti-terrorism, Crime and Security Act 2001, and if it is still being done, it is a serious criminal offence, even if it is done abroad.

When I was confronted with this issue, I went off to do a bit of research and make some inquiries. It seemed to me that the Attorney-General might have a point when he said that he thought that the inquiry might be going nowhere. 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. Reprehensible as it may be that that would enable certain people to go on shopping sprees around London and to take planes back to their country, and that some individuals in Saudi Arabia have Swiss bank accounts, none of those things amounts to the commission of a criminal offence. The Attorney-General and the other Law Officers have to focus on whether a criminal offence has been committed, and whether continuing an inquiry would be productive.

Mr. Ellwood: It is useful to place this matter in context. The al-Yamamah deal is worth £40 billion, and we are talking about moneys that have moved into various accounts to the value of about £50 million—the figures vary—which is less than 0.1 per cent. Does my hon. Friend agree that that is a small amount of money in comparison with the deal as a whole?

Mr. Grieve: My hon. Friend makes a legitimate point. I simply have not the slightest idea how much money has been paid as side commission, so I do not feel able to comment further on the matter. All that I can say is that, on the question of whether it is a criminal offence to pay a substantial sum of money—whether a tiny or a large percentage of the total involved—to a third party as part of an agreement, with the knowledge of the principal, I find it difficult to see how such an offence has been committed.

It was asked whether there might have been a failure to disclose these payments in accounts. I do not know the answer to that, but it would be a separate issue to that of corruption. I am not in a position to make a judgment on that. On the main issue, however, the Attorney-General had a legitimate point to make—unless of course he is deceiving Parliament.

Simon Hughes: Does the shadow Attorney-General acknowledge that the decision was not made on the basis that there might not be enough evidence to stack up in order to bring charges? It was made on the other ground on which prosecution investigations can be discontinued. We shall never know the answer unless we see the papers and the trail of discovery. The SFO has been charged to do this kind of work since it was set up in 1988, and its director has been in post for many years. Is it really credible that he would have committed himself and his staff to an investigation for almost three years if the basis of the crime did not exist in the first place?

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Mr. Grieve: The hon. Gentleman raises an important point. This is one of the reasons why this matter should be debated. I fully accept that that is a legitimate issue to raise. It is, however, possible to embark on an investigation without being clear about the full facts, and for those facts to emerge only during the course of the investigation. That is not unusual. Heaven knows, I have been involved often enough in prosecuting—and sometimes defending—individuals when the penny has dropped only on the first day of the trial that there is no case against the individual concerned. Indeed, I can think of one case—in which I was counsel for the defence—in which the prosecution ended up with egg all over its face because it was only at the close of the prosecution case that the penny dropped that there was no case against the defendant. A great deal of public money had been incurred by that stage.

The Solicitor-General: I have listened with care to the hon. Gentleman’s argument. He has raised the issue of the law of agency, which was of serious concern to the Attorney-General and me while we were looking at this matter. I can confirm that the law of agency was also one of the issues that the director of the SFO was looking at, along with the question of how we would be able to ask the appropriate questions, in view of the difficult circumstances relating to the Saudi Government. That is a significant problem in relation to this matter. On the issue of agency and whether there would have been a case, the hon. Gentleman raises some important points—indeed, points that the Attorney-General and I felt caused great concern, particularly if they meant that there would have to be 18 months of investigation before we could even come to the conclusion that there was no case to answer.

Mr. Grieve: I am grateful to the Solicitor-General for his comments, which remind me that I have not dealt with the first, and equally important, point raised by the hon. Member for North Southwark and Bermondsey (Simon Hughes), although I was in a sense coming to it.

I am not sure that I entirely agree with the hon. Gentleman—the Solicitor-General may be able to correct me—on the concerns that weighed on the mind of the Attorney-General and the director of the Serious Fraud Office when they looked into the matter. After the briefing that I attended, at which the hon. Gentleman was present, I was left with the impression that the public interest issue was viewed in light of uncertainties about whether a prosecution could be successful. It seems perfectly proper to weigh those two considerations in the same balance, and for one to have an impact on the other. I also had the impression that it was not simply the public interest test that led the director of the Serious Fraud Office, having discussed the matter with the Attorney-General, to decide to discontinue the investigation. I saw the two factors as running together. I am sure that the Solicitor-General will correct me if I am wrong.

Simon Hughes: I have just one other point to make, because I do not want there to be disagreement where there need not be. The hon. Gentleman and I were indeed both at the meeting with the Solicitor-General, and I am clear about the fact that both considerations were in play. The questions on the Law Officers’ minds
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were how much evidence there was, and what the national interest was. In the end, it was national interest that pulled the plug on the investigation, because in any event, irrespective of the Attorney-General’s view of where the investigation was going, they took the decision that they deemed necessary at the time. The hon. Gentleman and I are both clear that that was the decisive cause for the decision, but whether there would have been sufficient evidence to ensure a 50 per cent. chance of conviction is an open question.

Mr. Grieve: I certainly do not wish to have an unnecessary disagreement with the hon. Gentleman, and it is quite clear that there were real issues of public interest, in terms of national security, that weighed heavily on the Attorney-General. Indeed, the Attorney-General made it quite clear that, before making his decision, he called in the papers—he described graphically how he pored over them in his office for three days, reviewing the matter—and had discussions with the intelligence services, the Prime Minister, the Foreign Secretary, I think, and the British ambassador in Riyadh about the possible impact on national security, and therefore on the public interest. Under our constitution, the Attorney-General is the guardian of the public interest consideration in matters of prosecution.

That brings me to a second issue: in describing the Attorney-General’s reasoning, and when considering how he arrived at his view, one must ask whether he was being frivolous, or had gone on some bizarre frolic of his own, or was trying to deceive Parliament. I have to say to the hon. Member for North Southwark and Bermondsey that we should bear in mind the current state of the middle east, the importance of the state of our relations with Saudi Arabia, the current terrorist threat, the argument that close relations with the Saudi Government are important, and the fact that it appeared that the Saudi Government found the investigation irritating, to put it mildly—and we would almost certainly have needed their co-operation to bring the investigation to a satisfactory conclusion, because witnesses would have to be found in Saudi Arabia to establish the facts. All those factors make the Attorney-General’s reasoning appear perfectly credible.

This is not a criticism of the Attorney-General, but I was left in no doubt that his intervention must have had a major bearing on the conclusion that the director of the Serious Fraud Office eventually reached; I have always assumed that that was the case. If I may say so to the Solicitor-General, I do not consider that in any way improper. Still, the Attorney-General is perfectly entitled to say that, at the end of the day, it was the director of the Serious Fraud Office who took the decision, but I do not think that the Government ever suggested that the Attorney-General did not hold widespread consultation with all interested parties—quite legitimately, under the Shawcross rules—before arriving at the decision, or that he did not discuss the matter with the director of the Serious Fraud Office, who then went off and made his decision.

Sir Malcolm Rifkind: I do not disagree with what my hon. Friend says, but perhaps he does not go far enough. 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
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matter. It would be the Attorney-General, reflecting the view of the Prime Minister, who would then have discussions with the SFO.

Mr. Grieve: I am sure that my right hon. and learned Friend is perfectly right. I am not usually fair to the Prime Minister—I have no desire to be—but when he pointed out, quite openly, that he had had major involvement in the matter, it did not strike me as improper, although the fact remains that it is the Attorney-General who is the guardian of the public interest under our prosecution system. It is for the Attorney-General to make decisions, although it is also possible for those within prosecution services to make the decisions first, before they refer them to him. As I understand it, that is what the director of the Serious Fraud Office chose to do.

Rob Marris rose—

Mr. Grieve: I give way to the hon. Gentleman, but then I will make progress.

Rob Marris: I am grateful to the hon. Gentleman for showing his usual generosity. In reply to an intervention by the right hon. and learned Member for Kensington and Chelsea (Sir Malcolm Rifkind), the hon. Member for Twickenham (Dr. Cable) said that, in principle, one should be able to take into account national security, although not in this case. Does the hon. Member for Beaconsfield (Mr. Grieve) share my surprise about that?

Mr. Grieve: Yes, I do, and I am trying to explain to the House why, when I considered the matter, I came to the conclusion that there was absolutely no evidential basis for saying that the Attorney-General’s decision was wrong, however convenient it might be to do so from the point of view of narrow party political advantage. There was nothing whatever to support that suggestion. I do not want to take up much more of the House’s time, but the basic premise on which the hon. Member for Twickenham opened the debate is fundamentally flawed. He may argue against the system, and he might have argued against the al-Yamamah agreement in principle when it started, but if we focus on the narrow issue, the Attorney-General seems to have acted properly.

In conclusion, as a result of what happened, it has been suggested that we have the wrong prosecution system in this country. It has been suggested that we should do as the Irish have done, and make the Director of Public Prosecutions and the head of the Serious Fraud Office utterly independent of Government, using a system similar to that used for judicial appointments. Thereafter, the head of the Serious Fraud Office would make his own judgment about what was in the public interest, without reference to anybody else. I can see that that model has a superficial attraction, but the reality would be different to what is envisaged. First, I have serious doubts that such an independent prosecutor would have come to a different decision. Secondly, there would be the consequence that the matter would never have been debated. Debates such as today’s would never happen again, in any circumstances, and there would be no parliamentary scrutiny. It is extraordinary to suggest that that should be the state of affairs.

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