III. THE BAE/SAUDI AL-YAMAMAH CONTRACTS: IMPLICATIONS IN LAW AND PUBLIC PROCUREMENT: PUBLIC INTERNATIONAL LAW

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A.

Introduction

Recently, BAE Systems, a UK manufacturer of defence equipment has been embroiled in bribery allegations in respect of contracts to supply military aircraft⁰⁰¹ to the Government of Saudi Arabia. The allegations that have been levelled against BAE concerning these contracts include the payment of bribes to various members of the Saudi royal family and the use of various accounts to conceal these payments. This article will give a brief overview of the contracts between BAE and the Saudi Government; discuss the corruption allegations made against BAE and the investigations into these allegations by the Serious Fraud Office; and examine the UK's legal regime against the bribery of foreign public officials, assessing the UK's compliance with its obligations under the OECD Convention prohibiting such bribery. The article will conclude with an examination of the future prospects for BAE as the United States Department of Justice undertakes an investigation into the Al-Yamamah contracts.

B.

Background

The predecessor to BAE Systems, British Aerospace, was formed as a statutory corporation in 1977. Between 1981 and 1985, under Margaret Thatcher's privatization policies, the Government sold its stake in British Aerospace. BAE assumed its present form in 1999 after a merger with Marconi Electronic Company and the defence arm of General Electric Company. BAE Systems is currently among the top defence manufacturers in the world with annual sales in excess of £13 billion.⁰⁰²

BAE's relationship with Saudi Arabia dates back to 1966,⁰⁰³ but in terms of the Al-Yamamah contracts, the company's relationship with Saudi Arabia was formalized in September 1985, when a Memorandum of Understanding was signed committing the Saudi's to the purchase of 40 Tornado IDS aircraft, 24 Tornado ADV aircraft, 30 Hawk aircraft, and 30 PC-9 aircraft, together with associated support, services and ammunition at an initial cost of between £3 and £4 billion.⁰⁰⁴ The contract was entered into between the UK Government and the Saudi Government, with BAE acting as the supplier. The contract was to be paid for by means of an oil trading scheme, with a loan facility opened to meet any shortfall between the project costs and the funds generated by the oil deal.⁰⁰⁵

So far, the Al-Yamamah contracts have been conducted...