London Attempts to reopen a corruption inquiry into an arms deal between Saudi Arabia and Britain’s biggest defence firm collapsed yesterday as the law lords backed a decision to halt the investigation.

The five law lords unanimously upheld the decision by the Serious Fraud Office (SFO) to abandon its inquiry into BAE Systems’ £43 billion contract to supply arms to the Saudis. They ruled that Robert Wardle, the SFO’s former director, acted lawfully, and courageously, in concluding that he had no option but to halt the inquiry in the interests of national security.

The ruling is a vindication for the SFO, which has been embattled over its decision in December 2006 to discontinue the inquiry, a move that the High Court ruled this year was unlawful.

The finding brought angry condemnation from the campaigning groups who brought the original challenge and said that prosecutors were now powerless to resist threats from “those in high places”.

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