VZCZCXYZ0000
RR RUEHWEB

DE RUEHFR #0829/01 0641434
ZNY CCCCC ZZH
R 051434Z MAR 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 5331
INFO RUEHSS/OECD POSTS COLLECTIVE
RUEHBR/AMEMBASSY BRASILIA 1806
RUEHBU/AMEMBASSY BUENOS AIRES 1366
RUEHLJ/AMEMBASSY LJUBLJANA 0397
RUEHSG/AMEMBASSY SANTIAGO 0441
RUEHSF/AMEMBASSY SOFIA 0492
RUEHTL/AMEMBASSY TALLINN 0326
RUEHRH/AMEMBASSY RIYADH 0330
RUEHJI/AMCONSUL JEDDAH 0051
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAWJA/DEPARTMENT OF JUSTICE WASHDC

C O N F I D E N T I A L PARIS 000829 
 
SIPDIS 
 
STATE FOR EB/IFD/OMA, EUR/ERA, INL/C, L/LEI AND L/EB 
DOC FOR ITA/MAC/MTA/BARLOW, OGC/NICKERSON/MANSEAU 
DOJ FOR CRIMINAL DIVISION/FRAUD SECTION/MMENDELSOHN/JACOBSON 
USEU FOR MRICHARDS 
PASS TO US SECURITIES AND EXCHANGE COMMISION/ENFORCEMENT/RGRIME, 
INTL.AFFAIRS/TBEATTY 
 
FROM USOECD 
 
SIPDIS 
 
E.O. 12958: DECL: 03/05/2012 
TAGS: KCOR ECON EINV ETRD PREL OECD
SUBJECT: OECD: U.K.'S BRIEFING ON TERMINATED BAE/SAUDI ARABIA 
FOREIGN BRIBERY CASE TO THE WORKING GROUP ON BRIBERY, JANUARY 
16, 2007 
 
 
Classified By: CHARGE D'AFFAIRES CURTIS STONE FOR REASONS 1.5 (B 
AND D) 
¶1.  (SBU) The January 16-18, 2007 meeting of the OECD Working 
Group on Bribery (WGB) included a separate session on January 
16th devoted to the U.K.'s termination of an investigation into 
BAE plc and a defense contract with Saudi Arabia.  A condensed 
readout of that session was included in an overall readout of 
the January WGB plenary meeting transmitted septel.  A more 
comprehensive readout of the discussion is provided below. 
 
U.K. BRIEFING 
 
¶2.  (C) The WGB's Acting Chair opened the discussion by 
observing that the termination of the investigation appeared to 
constitute a violation of the OECD Anti-bribery Convention. 
U.K. delegation head Jo Kuenssberg said the U.K. recognized the 
level of interest of WGB members in the case and stressed the 
need to respect the confidentiality of the information contained 
in the U.K.'s briefing, which elaborated on the written reply 
the U.K. had provided to the WGB on January 12 in response to 
the Chairman of the WGB's request for information.  Kuenssberg 
noted that the case would be part of the written follow-up of 
the U.K.'s Phase 2 examination, scheduled for March, and 
commented that the U.K. delegation had not requested that the 
discussion of its decision to discontinue the BAE/Saudi Arabia 
be held in restricted session (closed to non-WGB members). 
Kuenssberg introduced members of the U.K. delegation, including 
Jonathan Jones, Private Secretary to the Attorney General (AG); 
from the Serious Fraud Office (SFO), Deputy Director Helen 
Garlick, Case Controller Matthew Cowie, and Tony Farris; and 
from the Ministry of Defense Police (MOD Police) Detective 
Superintendent Robert Allen. 
 
¶3.  (C) Garlick started by underscoring the U.K. delegation's 
willingness to answer as much as possible the questions of the 
WGB, bearing in mind pending litigation in the U.K.  Garlick 
reported that SFO and MOD Police investigators had expended more 
than 2 million pounds sterling on the BAE investigations.  She 
said on December 14, SFO Director Robert Wardle had decided to 
discontinue the joint SFO/MOD Police investigation based on his 
personal, independent judgment.  Garlick then described four 
distinct parts of the BAE/Saudi Arabia investigation: 
 
¶4.  (C) First, the relationship between BAE plc and Prince Turki 
Bin Nasir: evidence indicated payments had been made by two 
subcontractors to Prince Turki, who, as Deputy Commander of the 
Royal Saudi Air Force during the involved period, was in a 
position to exert influence on the al-Yamamah contract. 
Payments fell into three time periods:  before the 
implementation of the U.K.'s 2001 Act (effective February 14, 
2002); during a transition period; and following full 
implementation of the Act.  Evidence indicated that payments of 
up to 70 million pounds had been made to Prince Turki prior to 
implementation of 2001 Act.  SFO had evidence indicating BAE had 
conspired to circumvent the 2001 Act and another 3 million 
pounds were paid to Turki following implementation; 
 
¶5.  (C) Second, payments made to BAE's overseas agents: 
evidence indicated that substantial payments were made by BAE 
through XXXXXX XXXXXX to marketing consultants employed at 
the behest of the Saudi government after implementation of the 
2001 act, but no documents were produced to substantiate the 
provision of any genuine services by the consultants; 
 
¶6.  (C) Third, payments made under the al-Yamamah contract to an 
unnamed senior Saudi official: Garlick advised that in October 
2005, the SFO had demanded BAE produce documents including 
payments related to the al-Yamamah contract.  The company made 
representations to the AG on public interest grounds (political 
and economic considerations) as to why the investigation should 
 
 
be halted.  The AG undertook a Shawcross Exercise and sought 
representations from various British officials regarding the 
case.  The SFO Director wanted to continue the investigation. 
On January 25, 2006, the AG agreed that there was no impediment 
to continuing the investigation.  The SFO sought Swiss banking 
records regarding agents of BAE.  The SFO found reasonable 
grounds that another very senior Saudi official was the 
recipient of BAE payments.  The SFO was poised to travel to 
Switzerland in connection with its Mutual Legal Assistance (MLA) 
request when the decision to discontinue the investigation was 
made; and 
 
¶7.  (C) Fourth, potential fraud against the U.K.'s Export Credit 
Guarantee Department: the SFO investigated potential fraud 
against the EGCD and discovered false representations by BAE to 
conceal the corrupt dealings, which would constitute conspiracy 
to defraud under U.K. law. 
 
¶8.  (C) Garlick noted a number of difficult legal issues 
involved in the case, which put into question the sustainability 
of corruption charges for payments made prior to 2002.  Under 
U.K. law, the informed consent of the principal to the agent's 
actions may be offered as a defense, making possible an 
exception to the prohibitions on foreign bribery where the 
individual receiving the bribe acts with the consent of the 
principal.  Evidentiary problems were also presented in a case 
involving the Saudi absolute monarchy.  Garlick said information 
was being shared within the British government with a view to 
the wholesale reform of UK law on corruption.  She expressed 
concern that the BAE investigation had not concluded, but said 
while the Saudi Arabia case had been discontinued due to 
unusual/extraordinary circumstances, other investigations 
involving BAE activities in South Africa, Tanzania, Romania, 
Chile, and the Czech Republic continued. 
 
¶9.  (C) Jones cited public interest as the reason for 
discontinuation of the investigation, based on risks to 
international and national security and to the lives of U.K. 
citizens.  He said the U.K. was not seeking to avoid giving 
offense to another State or harming diplomatic relations with 
another State, and "still less" to avoid harming British 
commercial interests.  Jones said U.K. authorities do not 
believe the Anti-bribery Convention requires parties to pursue 
cases if doing so would compromise the fight against terrorism 
or the safety of citizens.  He said U.K.-Saudi cooperation was 
critical and that Saudi Arabia was the source of unique strains 
of intelligence on al-Qaida.  If Saudi Arabia were to withdraw 
such cooperation, the UK would be deprived of a key source of 
information.  Jones also cited UK-Saudi cooperation related to 
the Middle East Peace Process. 
 
¶10.  (C) Jones noted Britain had suffered one terrorist incident 
in July 2005 (London bombings) and other terrorism cases were 
under trial.  He said the conviction of one suspect had occurred 
because of international cooperation.  He noted the release of a 
report indicating 30 active terrorist plots in the U.K. and 
spoke of the real risk of terrorism at home and abroad.  The SFO 
Director was advised of risks posed if the investigation were 
continued.  Jones noted that if judicial review of the decision 
were brought, it would be defended.  He said the U.K. remains 
fully committed to tackling international corruption and stated 
that the decision to discontinue the investigation was not a 
comfortable one.  He asserted the decision was based on 
exceptional factors and did not set a precedent, commenting that 
other cases continue to be investigated.  Jones said the U.K. 
accepts that the decision sends out a negative signal and the 
U.K. intends to redouble its efforts to tackle remaining cases. 
 
WGB DISCUSSION 
 
¶11.  (C) As co-lead examiner of Britain's Phase 2 examination, 
 
 
the Canadian delegation said Canada considered that 
prosecutorial discretion remains valid, and is not limited to a 
determination of sufficiency of the evidence, but also of public 
interest.  She noted the U.K. Phase 2 report identified specific 
concerns regarding the U.K.'s definition of public interest 
(e.g. failure to exclude national economic interest or impact of 
relations with another State) and concerns regarding obstacles 
to the U.K.'s ability to start investigations of the foreign 
bribery offense.  The Canadian delegation said nothing in the 
U.K.'s explanation answered these concerns.  Garlick responded 
that prosecutorial discretion includes public interest and is 
guided by the Code of Crown Prosecutors, which lists matters 
which prosecutors may take into account in determining whether 
to bring prosecution.  She said the list is merely guidance and 
does not include specific reference to obligations under the 
OECD Anti-Bribery Convention.  She noted that in a prosecution 
under the common law bribery offense, with its broader 
definitions, the prosecutor would not face the obstacle 
involving the principal-agent issue, but would still have to 
consider the public interest. 
 
¶12.  (C) As co-lead examiner, the French delegation highlighted 
the Secretary General's comment that it was an important time in 
the life of the Convention.  They noted that the systemic nature 
of the current case may impact future WGB work.  The French del 
criticized the U.K.'s apparent limitation of what could be 
subject to prosecution (payments made before 2001), noting the 
issue was raised in the U.K.'s Phase 2 examination, and 
questioned the material nature of the cited national security 
grounds.  The French del stressed that Article 5 of the 
Convention prohibits consideration of the impact on relations 
with another State in decisions regarding enforcement, 
questioned what safeguards were available to assess invocations 
of national security, and highlighted the impact of such a 
decision on reciprocal commitments under the Convention.  The 
French delegation enquired further about the procedure used in 
this case, the identity of the real author of the decision, the 
scope of the AG review, and responsibility for assessing the 
public interest.  The delegation sought to clarify conditions 
under which a decision may be reached independently, the impact 
of representations of ministers and technical experts on that 
decision, and British industry views regarding the risks posed 
to cooperation by continuation of the investigation.  The French 
delegation also noted its interest in considering a Phase 2 bis 
examination (a second on-site evaluation of a country whose 
implementation of the Convention has appeared to be inadequate 
in practice) of the U.K. following discussions of the U.K.'s 
written Phase 2 follow-up report in March. 
 
¶13.  (C) Following the Acting Chair's statement that the U.K. 
had conceded that considerations involving relations with 
another state appeared to constitute a breach of Article 5 of 
the convention, the UK delegation objected and stated that it 
did not accept that there was a breach of Article 5 in this 
case.  The U.S. delegation took note of the experience and 
professionalism of U.K. delegation members.  The US del inquired 
into what appeared to be inconsistent accounts relating to 
differences in views of the SFO Director and Attorney General 
regarding the merits of the case, reports alleging British 
intelligence agencies had not joined the government's assessment 
that the case raised national and international security 
interests, and whether the SFO could provide WGB members with 
assurances that BAE would not continue to make corrupt payments 
to senior Saudi officials.  Garlick responded that it was her 
belief that SFO Director Wardle had given no credence to claims 
of commercial interests, jobs, or to diplomatic relations, but 
had been prompted solely by his belief, based on the 
representations of various government officials, that British 
lives and the lives of other nationals would be put at risk by 
continuing the investigation.  She conceded that given the 
investigation was terminated before charges were brought and a 
 
 
conviction obtained, there were "unpalatable economic and 
commercial results that will have to be resolved in another 
forum."  She said it was an unfortunate result of a decision 
taken properly.  Jones said there were shades of difference 
between the views of the AG and the SFO Director and that the AG 
doubted the prosecution's ability to overcome the legal hurdle 
regarding the principal-agent issue.  In the end, Jones 
contended, the decision had been based on public interest 
considerations, rather than an assessment about the sufficiency 
of the evidence.  Jones said press accounts reporting MI6's 
disagreement about the presence of national security interests 
in the case were incorrect and asserted that all intelligence 
agencies in the U.K. had agreed to the government's account 
finding national and international security risks present in the 
case. 
 
¶14.  (C) The Italian delegation commented that it was important 
that the WGB understood whether the decision to discontinue the 
investigation was based on specific information regarding the 
safety and security of the U.K. 
The Acting Chair questioned whether all international 
obligations should be read to imply a national security 
exception.  If so, she questioned who would determine such an 
exception was merited and what safeguards existed to ensure the 
exception was not raised without merit.  She speculated that any 
such exception would be invoked frequently.  She questioned 
whether the case should be viewed as one of necessity requiring 
exceptional measures and commented that it was not in the 
interest of the WGB or of the U.K. to be seen throwing the 
Convention out the window. She noted the March WGB meeting would 
include a review of institutional issues that may have 
influenced the U.K. decision. 
 
¶15.  (C) Secretariat Legal advisor Niccola Bonucci noted the SFO 
statement did not mention that no weight had been given to the 
potential effects on relations with another State or the 
identity of legal or natural persons involved, as prohibited by 
Article 5 of the Convention.  Garlick said she wished the SFO 
statement had made reference that the SFO had not considered 
relations with another State in reaching the decision to 
discontinue the investigation.  She asserted that severance of 
diplomatic ties was never a consideration for the SFO Director. 
Bonucci questioned whether paragraph 10 of the U.K. delegation's 
written statement of January 12 regarding UK/Saudi security, 
intelligence and diplomatic cooperation could be distinguished 
from the consideration of relations with another State 
prohibited by Article 5.  Garlick replied that the SFO drew a 
clear line between diplomatic cooperation generally vs. 
diplomatic cooperation affecting national and international 
security.  Bonucci asked whether the U.K. had taken into account 
the Commentary to Article 5, which stresses prosecutors' 
professional judgment regarding enforcement decisions and that 
such determination not be subject to improper influence prompted 
by concerns of a political nature.  Garlick noted Director 
Wardle's three meetings with the U.K. ambassador to Saudi 
Arabia, who had a unique perspective regarding consequences of 
continuing the investigation, had a profound effect on his 
views. 
 
¶16.  (C) The Australian delegation stated that it fully 
supported proper prosecutorial discretion and considered valid a 
distinction between relations with another State and national 
and international security interests.  The U.S. delegation 
commented that it was not appropriate at this juncture to 
conclude that Article 5 does not contemplate the proper 
invocation of national security interests.  The WGB would hear 
more about the U.K. system of implementation of the Convention 
and this particular case in the context of the U.K.'s follow-up 
written review in March.  As such, it appeared inappropriate to 
end consideration of the case prior to that further discussion 
or to conclude now that the case was exceptional.  The Acting 
 
 
Chair acknowledged that further discussion of continuing 
questions required follow-up.  The French delegation supported 
the U.S. statement and reiterated continued concerns regarding 
the U.K.'s position on prosecution of corrupt payments made 
prior to 2001 and the apparent consideration of the impact of 
diplomatic relations with another State, clearly proscribed by 
Article 5.  The French del requested more complete answers by 
the U.K. del to questions posed by the Secretariat's Legal staff 
and argued that the WGB should not bring the discussion to a 
premature end.  What one party considers an exceptional security 
interest today may be raised by another party in the future. 
The WGB would need to define the limits of a national or 
international security interest and it was essential that this 
discussion continue in March. 
 
¶17.  (C) The Acting Chair noted that experience gained from this 
case should be taken into account in revising anti-bribery 
instruments, including the Revised Recommendation.  She added 
that at the next meeting, the WGB would consider all possible 
appropriate actions, including a Phase 2 bis examination, if 
additional questions regarding the U.K.'s implementation of the 
Convention remained.  The Acting Chair noted that the Management 
Group would draft a written press statement for the Working 
Group's consideration.  The Canadian delegation expressed 
concern about procedures used in recent actions taken by the 
Chair, including issuance of press statements.  While the 
statement of the Chair may be made in his personal capacity, he 
should not characterize it as reflecting the position of WGB 
members. 
 
¶18.  (C) During a subsequent discussion of the press statement, 
several other delegations commented on the U.K.'s action in this 
case.  The Italian delegation remarked that the U.K. decision 
seemed to be exclusively supported by economic interests.  The 
Chilean delegation commented on the gulf between the U.K.'s 
actions and the Convention.  The Norwegian delegation 
underscored the WGB's mandate to monitor implementation of the 
Convention.  The Netherlands, U.S., Canada, France, Switzerland, 
Spain, Sweden, Chile, Italy, Norway, Greece, Estonia and 
Argentina joined a WGB consensus that the case raised serious 
concerns and should be considered further in March in the 
context of the U.K. written follow-up review of its Phase 2 
examination.  They agreed that a clear public statement 
expressing this view, without disclosing confidential 
information, was necessary to maintain credibility.  The German 
delegation joined consensus regarding concerns raised by the 
case and the need for confidentiality, and suggested, but did 
not receive support for, a weaker public statement.  The 
Australian delegation stressed the need for further discussion 
of the national security issue and that the WGB had not yet 
reached any decision in the case, but did not block consensus on 
issuance of the public statement, despite an attempt by the U.K. 
to weaken the draft statement.  A WGB public statement on the 
matter was issued on January 18, 2007 and posted on the OECD 
website. 
STONE