BAE to implement ethics report within 3 years

LONDON, July 22 (Reuters) - Britain's BAE Systems (BAES.L) is to implement all 23 recommendations of Lord Harry Woolf's company-sponsored report into its ethics, in a three-year programme that will be monitored by an external auditor.

The Woolf committee was set up in June 2007 by Europe's biggest defence contractor after long-standing allegations it paid kickbacks to a Saudi prince over a deal, known as al-Yamamah ("the dove"), for Tornado fighter jets.

Woolf reported in May that BAE, which has denied any wrongdoing, had not paid sufficient attention to ethical standards in the past. BAE said at the time: "The committee's findings will now be evaluated and acted upon".

On Tuesday, BAE said it hoped "to be recognised as a global leader in ethical business conduct" once a three-year programme to achieve benchmark standards of governance is completed.

"This programme is of fundamental importance to how we do business ... and it will derive benefits for our shareholders, employees and customers," Chairman Dick Olver said.

An investigation by Britain's Serious Fraud Office (SFO) into reports BAE paid about 1 billion pounds ($2 billion) over a decade to Prince Bandar bin Sultan in connection with the al-Yamamah deal was halted in December 2006 by former Prime Minister Tony Blair after the probe angered Saudi Arabia.

Authorities had cited the risks the inquiry posed to Britain's relationship with the oil kingdom, but the move attracted sharp criticism by anti-bribery campaigners and British media.

Blair's intervention was followed nine months later by Saudi Arabia awarding BAE a 4.43 billion pounds deal for 72 Eurofighter Typhoon combat jets.

But critics persisted by taking the government to court.

In April, judges said the SFO investigation should not have been halted, in a ruling that criticised the British and Saudi governments.

The government appealed that verdict earlier this month in Britain's highest court, the House of Lords. A verdict is not expected until October.

Separately, BAE faces a U.S. Department of Justice investigation into its compliance with anti-bribery laws, including its dealings with Saudi Arabia.

BAE has transformed itself in recent years from being a largely British business into a major global defence company.

It is now involved in most major U.S. and British military projects, including the F-35 Joint Strike Fighter, Type 45 destroyer, Astute submarine and mine-resistant ambush-protected (MRAP) vehicles for use in Afghanistan and Iraq. (Reporting by Dan Lalor; Editing by Richard Hubbard)