Identifier
Created
Classification
Origin
08LONDON1888
2008-07-18 16:26:00
CONFIDENTIAL//NOFORN
Embassy London
Cable title:  

BAE JUDICIAL REVIEW: HOUSE OF LORDS HEARS HMG

Tags:  KCOR EFIN OECD UK 
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VZCZCXYZ0005
RR RUEHWEB

DE RUEHLO #1888/01 2001626
ZNY CCCCC ZZH
R 181626Z JUL 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC 9227
INFO RUEHFR/AMEMBASSY PARIS 3253
RUEAWJA/DEPT OF JUSTICE WASHDC
C O N F I D E N T I A L LONDON 001888 

NOFORN
SIPDIS

PARIS FOR USOECD

E.O. 12958: DECL: 07/18/2018
TAGS: KCOR EFIN OECD UK
SUBJECT: BAE JUDICIAL REVIEW: HOUSE OF LORDS HEARS HMG
APPEAL

REF: A. 06 LONDON 8373

B. LONDON 1033

Classified By: Economic Counselor John McNamara for
Reasons 1.4 (b) and (d)

C O N F I D E N T I A L LONDON 001888

NOFORN
SIPDIS

PARIS FOR USOECD

E.O. 12958: DECL: 07/18/2018
TAGS: KCOR EFIN OECD UK
SUBJECT: BAE JUDICIAL REVIEW: HOUSE OF LORDS HEARS HMG
APPEAL

REF: A. 06 LONDON 8373

B. LONDON 1033

Classified By: Economic Counselor John McNamara for
Reasons 1.4 (b) and (d)


1. (SBU) Summary: On July 7-8 the Law Lords of the House of
Lords heard HMG's appeal of the High Court ruling that
Serious Fraud Office (SFO) Director Wardle acted unlawfully
when he abandoned the anti-corruption investigation into BAE
Systems' dealings in Saudi Arabia. HMG argued that Wardle
had not unlawfully given into threats, but rather weighed the
threats as part of his proper assessment of evidence; the
question of breaching rule of law does not apply; and it is
not for UK courts to interpret the OECD anti-bribery
convention. Lawyers for Campaign Against the Arms Trade
(CAAT) and The Corner House countered that rule of law does
apply, the SFO Director needed to show that all alternatives
were exhausted before abandoning the investigation -- the
arguments that prevailed in the first court case -- and the
SFO Director's understanding of the OECD convention is
relevant because he said his decision was in compliance with
the convention. The court will decide later this year. If
the Lords uphold the High Court ruling SFO could be ordered
to reconsider its decision to drop the investigation or to
reopen the investigation directly. End Summary.

Background
--------------


2. (U) In December 2006, HMG decided to abandon a multi-year
investigation into alleged corrupt dealings by BAE Systems in
connection with its arms contracts with Saudi Arabia citing
concerns of national security. The decision drew domestic
and international criticism (Ref A),which has not abated.
Two UK NGOs (Campaign Against the Arms Trade, CAAT, and The
Corner House) challenged the legality of the decision in the
UK courts on the basis that it was unlawful to give in to
"the threat made by Prince Bandar of Saudi Arabia" and that
the decision was inconsistent with the UK's international
obligations, specifically Article 5 of the OECD anti-bribery
convention. On April 10, 2008 the UK High Court ruled that
the Director of the Serious Fraud Office (SFO) acted
unlawfully when he stopped this corruption investigation (Ref

B).


3. (U) HMG chose to appeal this decision to the House of
Lords, also known as the Law Lords, the UK's equivalent to
the U.S. Supreme Court. (Note: There are 12 Law Lords, who
are professional judges appointed by the Queen on the advice
of the Prime Minister. These Lords are full Members of the
House of Lords, although from October 2009 the UK will
separate this legal function from the House of Lords. End
Note). Five Law Lords heard the case on July 7-8: Lords
Bingham, Hoffman, Rodger, Brown and Baroness Hale. The full
set of submissions may be found at:
http://www.caat.org.uk/judicialreview/jr/sfoa ppeal.php
This site includes the 39 page HMG (on behalf of SFO) case,
the 69 page CAAT case, witness statements from FCO, SFO
Deputy Director Helen Garlick, former SFO Director Robert
Wardle, and a CAAT statement about what they purport to know
about U.S. and Swiss investigations. The documents drawn
upon in the course of the presentations were in eighteen
volumes )- approximately a 3-foot-high stack of paper.


4. (U) According to a handout provided to those attending the
hearing, the issues the Law Lords are considering for the
appeal are: a) Is it unlawful for a prosecutor to surrender
to a threat made by a person outside the control of the
courts or public authorities of the UK, for the purpose of
halting a criminal investigation or prosecution, unless there
is no alternative course open to the prosecutor?; b) Was
there a failure to properly consider national security by the
prosecutor in this case?; c)Is the court entitled to construe
an unincorporated treaty (OECD Convention on Combating
Bribery of Foreign Public Officials ("the OECD Convention")),
where the prosecutor has stated that his decision is in
compliance with the treaty?; and d)In what circumstances, if
ever, is national security a consideration relevant to
Article 5 of the OECD Convention?

The Government Case
--------------


5. (U) HMG's lawyer, Jonathan Sumption, QC, speaking for most
of the day on July 7, argued that: 1) Wardle did not give in
to Saudi threats, but rather weighed the credibility and
consequences of the threats as part of his proper assessment

of evidence ) therefore he did not surrender his authority
or act unlawfully; 2) the courts should involve themselves
sparingly in SFO,s decisions, it is not their role; 3) the
question of breaching rule of law does not apply, as
abandoning the case on public interest grounds does not imply
a violation of rule of law (Note: Attorney General Goldsmith
said in December 2006 that public interest outweighed rule of
law in making the decision; Sumption is arguing that the two
are not linked); 4) Wardle has the discretion to determine
which cases to prosecute, a flexibility not unique to the UK
-- other countries, such as Germany and Canada, also have it;
and 5) UK courts should not discuss whether these actions
violate the OECD anti-bribery convention as it is the
jurisdiction of the members of the OECD Working Group on
Bribery to make such decisions. He urged the Lords not to
quash SFO,s decision (as the High Court ruled) just to have
the same decision be made to abandon the case under
unspecified "different grounds."

The CAAT case
--------------


6. (U) On July 8, lawyers representing CAAT and The Corner
House responded. David Pannick, QC, pushed back on the rule
of law point, the basis for CAAT's success in the original
hearing. He argued that for rule of law to be satisfied: 1)
who the accused is or who they know should not be considered,
although there can be other reasons not to investigate a
crime; and 2) SFO can only abandon an investigation due to
&strict necessity,8 which requires the SFO Director to show
that all alternatives were exhausted and that he understood
all parts of the decision (e.g. what Article 5 of the OECD
anti-bribery convention means). Pannick drew on numerous
examples to argue that SFO had not exhausted all options, in
particular that FCO had not tried to dissuade the Saudi
threats.


7. (C/NF) Dinah Rose, QC, argued that the meaning of Article
5 of the OECD convention )- that relations with another
state or economic interests will not be considered -- is
relevant because SFO voluntarily chose to consider it
although under no obligation to do so. SFO regularly said
the decision was in compliance with the OECD ) which, Rose
argued, it clearly was not. (Note: Rose was overheard
commenting during the break that the judges did not want to
hear that part of the evidence. Indeed, they sought to
shorten the length of time she had available to make her
case. End Note.)

Media Spin
--------------


8. (SBU) Only the Guardian had a reporter at the hearing, and
its articles focused on the more sensational bits of the
barristers' statements dealing with Saudi Arabia's threats.
(Note: Neither side questioned that threats were made.) On
July 8, the Guardian trumpeted that "government lawyers
denied that a Saudi prince had tried to pervert the course of
justice" to halt the corruption investigation. The article
focuses on HMG's argument (citing the new witness statements)
that the government did try to resist the threats and that
the threats clearly came from the Saudi government itself,
not only from a Saudi official with a personal interest in
seeing the investigation halted (Note: The article assumes
the official to be Prince Bandar, although Sumption never
mentioned a name in court). On July 9, the point taken from
the CAAT case was that the government did not try to fend off
Saudi threats. The article flags Pannick's assertion that
the UK Ambassador to Saudi Arabia "confessed" that he "should
have done more" to disabuse a Saudi official from making
threats. (Note: Full text in the FCO witness statement, which
HMG's barrister also relied on). The article concludes with
Pannick's statement that U.S. and Swiss authorities continue
their investigations "without any suggestions of damage to
national security."

Next Steps
--------------


9. (C/NF) The House of Lords is the UK's highest court of
appeal. If it upholds the High Court's ruling, the case will
return to the High Court to discuss a remedy for the unlawful
behavior. Some remedy options include: instructing the SFO
Director to "retake" the decision or ordering SFO to reopen
the investigation. CAAT is pressing for the latter; the
former leaves open the possibility that SFO will reconsider
the reasons for dropping the case and once again choose to
abandon the investigation -- but for different reasons. If
the Lords overturn the High Court's ruling, CAAT's judicial
challenge will have failed. The Law Lords deliberated
privately following the presentations and said they would
make a judgment in due course -- likely later this year
after Parliament's summer recess.

Comment
--------------


10. (C/NF) The hearing ran for two long days. Only HMG and
CAAT lawyers made presentations, speaking for hours at a time
without a break. No witnesses were called, although
additional witness statements were submitted in evidence.
The Lords periodically challenged assertions from both sets
of lawyers, often citing earlier cases they themselves had
been involved with. Neither party had ready answers any time
the judges interrupted the flow of their arguments with
questions. CAAT's lawyers drew clever examples that
occasionally sparked laughter in the audience, but the Law
Lords questioned them more than HMG,s barrister. In
particular, they asked if strict necessity was a
well-established rule. They also challenged the arguments
that encouraged the court to make a ruling on whether the SFO
Director had acted in accordance with the OECD convention.
However, it was CAAT's arguments that prevailed in the
original High Court ruling.

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