BAE says UK should hear corruption case

By Jim Wolf

WASHINGTON (Reuters) - Officials of BAE Systems Plc have told a U.S. court that a shareholder lawsuit charging illegal bribes were paid to win a Saudi arms deal worth up to $80 billion (40.4 billion pounds) should be heard by a British court, not the U.S. court.

In court papers filed late on Friday, the BAE defendants urged a U.S. federal judge to quash a suit by a U.S. pension fund with shares in BAE, Britain's top arms company. The suit charged they breached their fiduciary duties by allowing more than $2 billion in illegal bribes to Saudi Prince Bandar bin Sultan and others in the 1980s.

A lawyer for Bandar, a former Saudi ambassador to the United States who now heads Saudi Arabia's national security council, could not be reached for comment.

BAE and Bandar have strongly denied that wrongful payments were made to help secure the arms deal known as al-Yamamah, or "the Dove," in which Tornado fighter jets and other military hardware were sold to Saudi Arabia in the 1980s.

Britain's Serious Fraud Office dropped an investigation into the matter in December 2006. Then-Prime Minister Tony Blair said the investigation would damage national security.

In April, a British court ruled in favour of anti-arms trade campaigners that the investigation into allegations of bribery in arms deals with Saudi Arabia was ended unlawfully. The issue is on appeal to the House of Lords, Britain's highest court.

Lawyers for the defendants, including BAE's chief executive Mike Turner and board chairman Richard Olver, argued in the U.S. District Court that the British court's ruling showed there "are live issues in England ... properly addressed under English law."

The shareholder suit was brought in September 2007 by a pension fund for employees of Harper Woods, Michigan. Defendants include all BAE board members plus several of the company's current and former top executives.