The pressure mounts on Britain to stamp out the brown-envelope culture

After the dropping of the BAE-Saudi case, other bribery and corruption probes are moving slowly, and international authorities wonder if we mean business in tackling corporate kickbacks. David Connett reports

Britain's woeful record in combating bribery and corruption is again in the spotlight after an OECD team arrived in London to examine why we are failing to bring prosecutions against UK firms accused of kickbacks and graft.

The Government's record was put under microscopic scrutiny as the OECD sought reassurance about the UK's commitment to fighting bribery and corruption after the controversial decision to halt the BAE/Al-Yamamah inquiry. The review team, led by French and Canadian judges, closely questioned officials and investigators last week about the decision to abandon the probe into the Saudi arms deal.

In particular, they were seeking assurances that the parliamentary claim of former Attorney General Lord Goldsmith – "no company is above the law" – was more substance than spin.

Britain has come under intense pressure to improve the way it tackles corruption after the worldwide outcry sparked by the dropping of allegations that BAE bribed senior Saudi officials to win a lucrative arms deal. The decision to stop the Al-Yamamah investigation on national security grounds alarmed the OECD, whose last two reports have been critical of UK efforts to combat payola.

The OECD is particularly critical of the Government's failure to introduce modern anti-bribery legislation and of the continuing lack of any prosecutions. The concerns have been underlined by the fate of a second overseas corruption investigation. The case, which would be the first brought by the Serious Fraud Office (SFO), has been delayed in the Attorney General's office for more than five months.

Last October the SFO recommended pursuing Vuc Hamovic, the chairman of London-based firm Energy Financing Team. Mr Hamovic, a British-Serbian national, has been questioned as part of an investigation into energy deals and the fate of £6m of aid money given to the Balkans to finance better electricity supplies after the war in Bosnia.

The Attorney General's office insists it is not stalling on the case. A spokesman for Energy Financing Team said the firm had been told no action would be taken and that it was confident Mr Hamovic had no case to answer.

Among those questioned last week was Robert Wardle, outgoing director of the Serious Fraud Office. The SFO has been given the lead role in handling foreign bribery allegations and has created a special unit to vet them. The Government has given it £22.8m to investigate UK involvement in a sanctions-busting scandal. More than 70 British firms are implicated in a UN report that claims thousands of international companies paid kickbacks to Saddam Hussein's former regime in Iraq under the discredited oil-for-food scheme. Lord Goldsmith pledged the money as he was defending his decision to Al-Yamamah inquiry.

The SFO has indicated, however, that it expects the alle- gations, if proved, would generally not constitute foreign bribery offences under UK law and would be prosecuted on other grounds.

The OECD was keen to quiz Mr Wardle about his role in the Al-Yamamah decision and about the need for better laws to take on companies and business people who bribe to win contracts.

Britain prosecutes bribery under a confusing mix of common law and statutory offences. The Crown Prosecution Service has abandoned using one of the main laws – the 1916 Prevention of Corruption Act – after concerns about its compliance with the Human Rights Act. Lawyers and investigators now rely heavily on clauses in the Anti-Terrorism, Crime and Security Act 2001, which specifically outlawed bribes made outside the UK, or involving foreign agents with no connection to the UK.

The Law Commission is currently reviewing bribery law and is expected to produce a draft Bill in the autumn. This is the main reason why a draft Corruption Bill introduced by Lord Chidgey in 2006 was quietly strangled by denying it parliamentary time, according to Whitehall sources.

Detective Chief Superintendent Steve Wilmott, head of the City of London Police's Economic Crimes Unit, was also questioned by OECD investigators.

The City force has set up one of the world's first dedicated units to investigate allegations of overseas corruption involving UK firms. Originally conceived to probe seven or eight cases a year, it currently has 26 ongoing inquiries. The 10-strong team has been further boosted by funding of more than £100,000 from the Department for Business, Enterprise and Regulatory Reform, for more officers to cope with the extra caseload.

Det Ch Supt Wilmott has dismissed suggestions that the UK is reluctant to deal with overseas corruption. "Within 12 months of government funding, we have taken on 26 cases. We had arrested suspects within six months. I am confident it is only a matter of time before we achieve a successful prosecution. There is no question of a lack of commitment on our part."

Not all the evidence the OECD team heard was so positive. Sue Hawley, director of Corner House, the campaign group for social justice, said: "I should think they [the OECD] have little to be impressed about. It has been five years since their first report and the Government has done little to respond to their concerns. In fact the only thing the Government has really done is introduce a new draft constitutional Bill which will give the Attorney General a new power to halt bribery prosecutions on national security grounds."

Corner House, along with fellow pressure group Campaign Against the Arms Trade, launched a legal challenge to review the SFO's decision to abandon the Al-Yamamah investigation. They expect to learn this week whether their challenge has been successful. If they are, ministers may find themselves in the dock yet again.