Cayman Islands: The Met's Caribbean connection

Scotland Yard's bungled anti-corruption operation could now result in the publication of documents that could rock the tax haven

With a backdrop of tales of corruption and murky collusion in the Caribbean, two former senior British police officers are set to confront each other in a courtroom battle that could shed new light on a Scotland Yard team's controversial investigation in one of the world's largest tax havens.

The former head of the Cayman Islands' police force is suing for wrongful dismissal after he was sacked four years ago during an inquiry into an alleged illegal break-in at a newspaper office. The search was part of a local leak inquiry over claims of improper links between police and press on the British overseas territory. But after Scotland Yard was called to the islands in 2007, the case spiralled into a multimillion-pound inquiry that reached the top ranks of the local judiciary.

The affair resulted in a clearout of the top ranks of the islands' police force, the wrongful arrest of a senior judge who was later awarded more than £1m damages, embarrassment for the Met and professional disgrace for a British lawyer called in to advise the investigation.

The inquiry – codenamed Operation Tempura and overseen by former assistant commissioner John Yates, who later quit the Yard over the phone hacking scandal – was halted in 2009 without any successful prosecutions and with the Scotland Yard team dispatched from the Caymans.

But the controversy is set to be reignited with a legal battle that could feature documents that the Foreign Office has refused to make public because of fears it could damage the islands' multi-billion-pound offshore finance industry.

The sacked police chief, Stuart Kernohan, is due to appear at a mediation hearing in June in London to try to reach a deal over his claim against the Attorney-General of the islands, as well as the man who led the Scotland Yard probe, former Detective Chief Superintendent Martin Bridger.

If the case is not resolved, it will go to the Grand Court of the Caymans where details of potentially embarrassing private meetings between senior police and British-appointed officials are likely to be aired. "This is typical of this whole case," one of the lawyers closely involved in the case told The Independent. "Someone has made a complete and utter cock-up and unless people start disclosing documents we won't find out who it was."

The saga soured relations between Britain and the Caymans and comes amid new turmoil in the tax haven. The Independent reported last month that a Conservative peer, Lord Blencathra, faces investigation over lobbying work on behalf of the islands. The islands' Premier is at the centre of three police inquiries, including two into financial irregularities, according to reports from the Cayman Islands. William McKeeva Bush denies the claims.

"The continual rumours of investigations... are reminiscent of, and consistent with, the Operation Tempura fiasco and other attempts over the years," he said in a statement reported last week. "It is now obvious to the Premier that there are certain civil servants in the Foreign and Commonwealth Office...who continue to apply the policies of the former UK Labour Government with a view to destabilising the Cayman Islands."

Operation Tempura started in 2007 following claims that a senior police officer was passing confidential information to a newspaper proprietor. Mr Kernohan, with a force of only a few hundred officers, asked for Scotland Yard's help. Martin Bridger, a veteran of anti-corruption investigations, was sent and began a secret inquiry.

That swiftly dismissed the claim of high-level corruption, but quickly put the spotlight on the search at the offices of Cayman Net News a week before Mr Bridger arrived on the islands.

One of its journalists, John Evans, said in a statement he had been asked to look for evidence after discussions with Mr Kernohan. He added that he had also been asked by a senior judge, Mr Justice Alex Henderson, to try to find the identity of a letter-writer who had criticised the island's judiciary. Mr Henderson denied giving Mr Evans a "brief" to find the letters.

Mr Kernohan was suspended in March 2008 and left the islands. Eight months later he was sacked by then governor Stuart Jack – a career diplomat and the most powerful man on the island – when he refused to return. Judge Henderson was arrested in September 2008 but was released without charge.

A retired British judge, Sir Peter Cresswell, was brought in to review the case, finding that the arrest of Mr Henderson was illegal and strongly criticising the Tempura probe. As a result of his findings, Martin Polaine, a British barrister brought in to advise the Tempura team, was struck off by the Bar Council. Mr Henderson was later awarded more than £1m.

The reputation of the Tempura team was in tatters. The Daily Mail ran a series of critical stories about the police "Sunshine Squad" amid claims of drinking and hard partying by members of Mr Bridger's team.

"Anybody who blows the whistle or creates trouble [in Cayman] is dead meat," said Jack Blum, a Washington lawyer who works on offshore issues. "There are the cops and the people who try to do the right thing and then there are the people trying to protect the financial centres and business that comes through as a result."

In 2010, Mr Polaine hit back with a complaint of his own to the Foreign Office, later joined by Mr Bridger, which accused senior members of the Caymans judiciary of seeking to frustrate the inquiry. The complaint, seen by The Independent, also criticised what they said were the "inappropriate actions" of senior Foreign Office officials and judicial bias.

Mr Polaine later dropped out of the action but Mr Bridger continued. The complaint was rejected after an inquiry by a British barrister commissioned by the islands' new governor, but the 185-page report has never been made public. Last year, the Foreign Office turned down a request from a Cayman Islands newspaper for the original complaint and the response. It said it felt that "disclosure of the information requested could lead to a loss of confidence within the international community which could impact negatively on the Cayman Islands' reputation and, more directly, on its financial services industry."

A copy of the latest report is understood to have been handed to Mr Bridger, who is being sued by Mr Kernohan. He declined to reveal its contents for legal reasons. But if the wrongful dismissal case ever comes to court, it could be embarrassing for the Foreign Office. The case is likely to look at whether Mr Jack, the former governor, knew anything about the search before it happened. Asked to comment on the affair, a Foreign Office spokesperson said: "The FCO/UK Government is not a party to the private legal action brought in the courts of the Cayman Islands. In any case, we do not comment on ongoing legal cases."

Mr Bridger – described by former Scotland Yard colleagues as a meticulous note-taker – is believed to have taken hundreds of pages of documented notes of meetings with the island's leaders when he left the Caymans, which he is confident will support his side of the story.

"There are many aspects of this matter, a number of which are not in the public domain, which are due a full and open examination," said Mr Polaine. "I would welcome thorough and objective scrutiny of what took place. In particular the respective roles of the FCO and of the Cayman Governor's Office in some of the key events, before during and after the Tempura investigation, cry out for explanation."

Both Mr Bridger and Mr Kernohan declined to comment.