Woolf's BAE ethics review calls for tougher anti-bribery controls

BAE Systems, the defence giant which has been dogged by corruption allegations, has admitted eth-ical failings in the conduct of its business, a report revealed yesterday.

An independent inquiry chaired by the former Lord Chief Justice, Lord Woolf, revealed that "both the chairman and the chief executive [of BAE], in discussions with us, acknowledge that the company did not in the past pay sufficient attention to ethical standards".

The report, commissioned by BAE in the wake of a series of scandals, concluded that while it had cleaned up some of its business practices, it still had "a substantial task ahead if it is to meet higher standards".

The disclosure comes as the House of Lords prepares to rule whether the Serious Fraud Office should re-open its inquiry into BAE's arms deals with Saudi Arabia. The Law Lords are reviewing whether the SFO unlawfully terminated its investigation into claims that BAE illegally paid hundreds of millions of pounds in bribes to secure part of a £43bn arms deal between Britain and the Saudis in 2006. The al-Yamamah deal was signed in the 1980s but continued into the 1990s, and involved BAE selling Tornado and Hawk jets, as well as other weapons, and also included long-running maintenance and training contracts.

BAE has been dogged by allegations of unethical practices, which have damaged its reputation and also drawn in the Government. Lord Woolf's report sets out 23 recommendations for the company, which BAE has pledged to implement. Both the chairman, Dick Olver, and the chief executive, Mike Turner, "acknowledged that the company did not in the past pay sufficient attention to ethical standards and avoid activities that had the potential to give rise to reputational damage", said the report.

It added: "They recognise that, justly or otherwise, these perceptions have damaged the company's reputation and that it must continue along the route of taking all practicable steps to ensure that such circumstances do not re-occur in relation to future contracts."

Lord Woolf said: "If you are a company that indulges in unethical behaviour, you will find yourself in the position BAE finds itself in."

However, he added: "I emphasise that I am talking about the present. Nothing that we identified in the activities of this company at the present time suggest that it is corrupt."

He also denied that his £1.7m inquiry was a whitewash, saying that he and his committee were asked to assess BAE's current procedures and plot the best way forward for the group.

"This is a robust report that gives demanding recommendations for the future. We were not given the job of looking at the past, so we can hardly be accused of whitewashing something we weren't asked to do."

He likened BAE's situation to that of the death of Diana, Princess of Wales, saying that however many reports were conducted into it, some people would "never be satisfied". "Many people would say sometimes 'enough is enough' if you are referring, as most people are, to what happened 20 years ago," he added.

His committee urged BAE to develop, publish and implement a global code of ethical business conduct overseen by internal auditors. He also called for a senior executive to take charge of "ensuring and assuring high standards across the company".