David Leigh and Rob Evans

THE GUARDIAN | THE BAE FILES

Sau­di Ara­bi­a’s rulers threat­ened to make it eas­i­er for ter­ror­ists to attack Lon­don unless cor­rup­tion inves­ti­ga­tions into their arms deals were halt­ed, accord­ing to court doc­u­ments revealed yes­ter­day.

Pre­vi­ous­ly secret files describe how inves­ti­ga­tors were told they faced “anoth­er 7/7” and the loss of “British lives on British streets” if they pressed on with their inquiries and the Saud­is car­ried out their threat to cut off intel­li­gence.

Prince Ban­dar, the head of the Sau­di nation­al secu­ri­ty coun­cil, and son of the crown prince, was alleged in court to be the man behind the threats to hold back infor­ma­tion about sui­cide bombers and ter­ror­ists. He faces accu­sa­tions that he him­self took more than £1bn in secret pay­ments from the arms com­pa­ny BAE.

He was accused in yes­ter­day’s high court hear­ings of fly­ing to Lon­don in Decem­ber 2006 and utter­ing threats which made the prime min­is­ter, Tony Blair, force an end to the Seri­ous Fraud Office inves­ti­ga­tion into bribery alle­ga­tions involv­ing Ban­dar and his fam­i­ly.

The threats halt­ed the fraud inquiry, but trig­gered an inter­na­tion­al out­cry, with alle­ga­tions that Britain had bro­ken inter­na­tion­al anti-bribery treaties.

Lord Jus­tice Moses, hear­ing the civ­il case with Mr Jus­tice Sul­li­van, said the gov­ern­ment appeared to have “rolled over” after the threats. He said one pos­si­ble view was that it was “just as if a gun had been held to the head” of the gov­ern­ment.

The SFO inves­ti­ga­tion began in 2004, when Robert War­dle, its direc­tor, stud­ied evi­dence unearthed by the Guardian. This revealed that mas­sive secret pay­ments were going from BAE to Sau­di Ara­bi­an princes, to pro­mote arms deals.

Yes­ter­day, anti-cor­rup­tion cam­paign­ers began a legal action to over­turn the deci­sion to halt the case. They want the orig­i­nal inves­ti­ga­tion restart­ed, argu­ing the gov­ern­ment had caved into black­mail.

The judge said he was sur­prised the gov­ern­ment had not tried to per­suade the Saud­is to with­draw their threats. He said: “If that hap­pened in our juris­dic­tion [the UK], they would have been guilty of a crim­i­nal offence”. Coun­sel for the claimants said it would amount to per­vert­ing the course of jus­tice.

War­dle told the court in a wit­ness state­ment: “The idea of dis­con­tin­u­ing the inves­ti­ga­tion went against my every instinct as a pros­e­cu­tor. I want­ed to see where the evi­dence led.”

But a paper trail set out in court showed that days after Ban­dar flew to Lon­don to lob­by the gov­ern­ment, Blair had writ­ten to the attor­ney gen­er­al, Lord Gold­smith, and the SFO was pressed to halt its inves­ti­ga­tion.

The case offi­cer on the inquiry, Matthew Cowie, was described by the judge as “a com­plete hero” for stand­ing up to pres­sure from BAE’s lawyers, who went behind his back and tried to secret­ly lob­by the attor­ney gen­er­al to step in at an ear­ly stage and halt the inves­ti­ga­tions.

The cam­paign­ers argued yes­ter­day that when BAE failed at its first attempt to stop the case, it changed tac­tics. Hav­ing argued it should not be inves­ti­gat­ed in order to pro­mote arms sales, it then recruit­ed min­is­ters and their Sau­di asso­ciates to make the case that “nation­al secu­ri­ty” demand­ed the case be cov­ered up.

Moses said that after BAE’s com­mer­cial argu­ments failed, “Lo and behold, the next thing there is a threat to nation­al secu­ri­ty!” Dinah Rose, coun­sel for the Cor­ner House and the Cam­paign against the Arms Trade, said: “Yes, they start to think of a dif­fer­ent way of putting it.” Moses respond­ed: “That’s very unkind!”

Doc­u­ments seen yes­ter­day also show the SFO warned the attor­ney gen­er­al that if he dropped the case, it was like­ly it would be tak­en up by the Swiss and the US. These pre­dic­tions proved accu­rate.

Ban­dar’s pay­ments were pub­lished in the Guardian and Switzer­land sub­se­quent­ly launched a mon­ey-laun­der­ing inquiry into the Sau­di arms deal. The US depart­ment of jus­tice has launched its own inves­ti­ga­tion under the for­eign cor­rupt prac­tices act into the British mon­ey received in the US by Ban­dar while he was ambas­sador to Wash­ing­ton.

Prince Ban­dar yes­ter­day did not con­test a US court order pre­vent­ing him from tak­ing the pro­ceeds of prop­er­ty sales out of the coun­try. The order will stay in place until a law­suit brought by a group of BAE share­hold­ers is decid­ed. The group alleges that BAE made £1bn of “ille­gal bribe pay­ments” to Ban­dar while claim­ing to be a “high­ly eth­i­cal, law-abid­ing cor­po­ra­tion”.