The British government's decision to drop a corruption inquiry into a lucrative arms deal between Saudi Arabia and BAE Systems PLC was illegal, two judges ruled Thursday.
The judges did not immediately order the investigation to be reopened, but said they would hear further arguments about the next steps in the case.
Former Prime Minister Tony Blair had taken responsibility for the decision by Britain's Serious Fraud Office, or SFO, in 2006, claiming the investigation threatened national security because of the possibility it would provoke the Saudi government into stopping cooperation on combating terrorism. Blair said the probe also threatened British jobs.
The government's decision was challenged by the Campaign Against Arms Trade and social lobby group Corner House.
The SFO was investigating allegations that BAE — a leading global defense and aerospace company — had a multimillion pound (dollar) "slush fund" offering sweeteners to officials from Saudi Arabia in return for lucrative contracts.
Lord Justice Alan Moses and Justice Jeremy Sullivan said the British government and the Serious Fraud Office were wrong to give in to pressure from Saudi officials to stop in the inquiry or lose contracts for Typhoon fighter jets.
"The claimants succeed on the ground that the director and government failed to recognize that the rule of law requires the decision to discontinue (the investigation) to be reached as an exercise of independent judgment," the judges said.
They said the SFO's director had been required to satisfy the court that everything had been done to resist any threats, but "he has failed to do so."
"No one, whether within this country or outside, is entitled to interfere with the course of our justice."
"It is the failure of government and the defendants to bear that essential principal in mind that justified the intervention of this court."
The pressure groups' lawyer, Dinah Rose, had argued that the government's decision was made on tainted advice that included illegal considerations about commercial matters, notably threats from senior Saudi Arabian officials that BAE would lose a $19.7 billion contract to buy Typhoon Eurofighter jets if the investigation was not stopped.
The two groups also allege that halting the probe contravened the Organization for Economic Cooperation and Development's anti-bribery convention, disregarded Saudi Arabia's obligations under international law and was against British law.
Rose said government lawyers had not disputed an allegation that Saudi Prince Bandar bin Sultan, the former ambassador to the United States and now head of Saudi Arabia's National Security Council, told Blair during a meeting in July 2006 to stop the inquiry or lose the Typhoon contract.
Rose told the court that Bandar then met with officials from the British Foreign Office in December — shortly after he reportedly told the government the contract would be canceled within days and held talks with former French President Jacques Chirac about an alternative purchase of Rafale fighter aircraft.
Days after that meeting, Blair sent a letter to the attorney general, Peter Goldsmith, demanding that Goldsmith stop the investigation.
Blair said he was concerned about the "critical difficulty" in negotiations with Saudi Arabia over a contract for Typhoon fighters, as well as "a real and immediate risk of a collapse in U.K./Saudi security, intelligence and diplomatic cooperation," the letter said.
Shortly after, despite unease from Goldsmith, according to documents tendered to the court, SFO Director Robert Wardle confirmed the investigation had been dropped.
The judges said they relied on claims by Corner House and CAAT, based on media reports, that the threat to drop the Typhoon contract was made directly by Saudi Prince Bandar bin Sultan to Blair's chief of staff, Jonathan Powell.
Government lawyers did not dispute that, the judges said.
"Had such a threat been made by one who is subject to the criminal law of this country, he would risk being charged with an attempt to pervert the course of justice," the judges said.
"No one suggested to those uttering the threat that it was futile, that the United Kingdom system of democracy forbade pressure being exerted on an independent prosecutor, whether by the domestic executive or by anyone else," the judges said.