Foreign Secretary Jack Straw will face questions in the House of Commons this week over his department's role in the UK's largest criminal corruption inquiry involving an alleged £7 million payment by British Aerospace into secret offshore accounts owned by the Foreign Minister of Qatar.
Last week The Observer revealed that Jersey's attorney-general had suddenly dropped a two-year criminal probe into trusts set up in the Channel Islands by Sheik Hamad Bin Jassim Bin Jaber al-Thani, the Qatari Minister for Foreign Affairs.
Senior sources close to the investigation told The Observer that BAE, now known as BAE Systems, had paid almost £7m into the trusts. The British defence company is not the subject of the criminal probe, which centres on this alleged payment to Sheik Hamad.
Detectives believe the payments, made by BAE and other European arms companies, were intended as sweeteners to secure lucrative arms contracts. It remains unclear which contracts are said to be linked to the BAEpayments.
In 1996, then Tory Defence Minister Michael Portillo flew to the Qatari capital Doha to sign a £500m arms deal with the Gulf state, which was rebuilding its arsenal after Iraq's invasion of Kuwait. The deal was supposed to include the sale of BAE's Hawk fighter planes, but these aircraft were never delivered.
BAE has confirmed it acted as the main contractor on the sale of Piranha armoured vehicles, made by another British defence company, to Qatar. Last year BAE, which has an office in Doha, was at the centre of the sale of British military equipment to Algeria. The deal, condemned by human rights campaigners because of Algeria's poor humanitarian record, was brokered by Qatar.
Sheik Hamad has denied any wrongdoing, and there is no suggestion BAE acted unlawfully since at the time of the alleged payments it was not illegal for British companies to pay foreign politicians.
It was disclosed last week that Sheik Hamad has since paid £6m to the Jersey authorities for any 'damage perceived to have been sustained in the events that have happened' as part of the deal that led to the probe being dropped. Sheik Hamad, the uncle of the Emir of Qatar, is one of the richest and most powerful figures in the Middle East. The Jersey investigation sparked a major diplomatic row between the UK and Qatar, one of the largest buyers of British arms.
The Observer has learnt that the Foreign Office met Jersey authorities to 'explain' the damage the investigation was having on relations. They are said to have pointed out the risk of losing trade and the importance of Qatar as a strategic ally in the 'war against terrorism'.
But backbench MPs will be quizzing Straw on the precise role his department played in ending the inquiry when Parliament returns this week. Liberal Democrat MP Norman Baker is writing to Straw, demanding assurances that the Government did not put untoward pres sure on the Channel Island to drop a criminal investigation for diplomatic reasons. He also wants to know whether Ministers or officials in the Ministry of Defence were aware of the payments.
Baker said: 'Here we have allegations from Jersey investigators that British Aerospace paid a Foreign Minister £7m to win an arms contract. I want to know who knew about these alleged payments and whether or not they had any official sanction.'
He also wants to know why the investigation was suddenly dropped.
The office of Jersey's attorney-general said the investigation had ended because it was 'not in the public interest' to pursue it and may 'affect adversely relations' between Qatar and the UK. It also pointed out the difficulty of prosecuting Sheik Hamad, as he was likely to have diplomatic immunity from any criminal charges.