Pressure on the Serious Fraud Office (SFO) from Tony Blair and the Attorney-General to drop its inquiry into alleged corruption in arms deals between BAE Systems and Saudi Arabia could be viewed “just as if a gun had been held to the director’s head”, a High Court judge said today.

Lord Justice Moses, who is hearing a legal challenge to the dropping of the investigation by two campaign groups, said: “I have seen nothing to suggest that anyone did anything but roll over.”

Lord Justice Moses and Mr Justice Sullivan at the High Court in London are hearing a judicial review brought by the Campaign Against Arms Trade (CAAT) and Corner House Research, which campaigns on corruption, environmental and social justice issues.

The court was told that Tony Blair, the Prime Minister at the time, applied “irresistible pressure” to end the SFO’s investigation in 2006. It was dropped in December of that year.

The SFO inquiry centred on allegations of corruption between BAE and Saudi Arabia in the £43 billion al-Yamamah deal in 1985 in which BAE supplied Tornado and Hawk jets and other equipment.

At the time, Mr Blair and Lord Goldsmith, the Attorney-General, were alleged to have tried to have influenced the SFO to drop the case while BAE and the Government were negotiating a key order for Typhoon fighters with the Saudis.

The deal was sealed last year.

Mr Blair said that he was only concerned with national security because the Saudi Government threatened to stop co-operating in intelligence work.

Dinah Rose, QC, representing Corner House, said that he “stepped over the boundaries of what was permissible” and wrongly interfered in a legal matter after threats by the Saudis.

Ms Rose said that Robert Wardle, the SFO director, said in a press statement on December 14, 2006, that the decision had been made after representations to him and Lord Goldsmith that ending the inquiry was necessary “to safeguard national and international security”.

Ms Rose told the court that the “very uncomfortable” Attorney-General gave further explanation to Parliament, saying that the Prime Minister and foreign and defence secretaries had “expressed the clear view” that continuing the investigation “would cause serious damage to UK/Saudi security, intelligence and diplomatic co-operation”.

But Ms Rose argued that the real motivation was commercial considerations amid the talks over the Typhoon order.

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