Cleared director loses £1m claim for compensation

High Court throws out Ali Daghir's claim that his jailing resulted from malicious prosecution by Customs and Excise

A former company director wrongly convicted of supplying arms to Iraq lost his claim for compensation yesterday.

Ali Daghir brought the action against Customs and Excise, alleging malicious prosecution and abuse of process over his original trial in 1991. He was seeking a minimum of £1m in damages, maintaining he has never been able to resume his successful business career because of the case, which saw him jailed for five years before the Court of Appeal overturned the verdict in 1994.

Despite being cleared, Mr Daghir, 61, is still on the US banned list of businessmen, and American citizens are forbidden from dealing with him.

In the High Court yesterday, the judge, Charles Gray, called a sudden halt to the proceedings which were in their fourth week. The judge rejected the abuse of process application and discharged the jury on the malicious prosecution claim before ruling Customs had no case to answer. Malicious prosecution cases are one of the few instances in which civil cases can be heard by juries.

Mr Daghir, who lives in Esher, Surrey, and holds dual Iraqi-British nationality, is one of the few business people wrongfully accused of selling arms to Saddam Hussein's regime not to be compensated. So far, seven former executives tied up in the Arms to Iraq litigation have received damages, with one of them, Reginald Dunk, being paid more than £1m.

Mr Daghir's case, for which he received legal aid, took the jury back to the days of 1990 when Customs was trying to prevent potential weapons from the West reaching Baghdad. Documents released in the subsequent Arms to Iraq inquiry show that at times, Customs was acting on its own, not consulting other Whitehall departments, not heeding their advice and not aware that they were, in some cases, happy for the British firms to continue trading with Iraq. Mr Daghir was a target of Operation Quarry, a joint investigation mounted by British and American Customs to thwart Iraq's nuclear weapons-building programme. Margaret Thatcher, as Prime Minister, endorsed the transatlantic effort.

The businessman ran a small electrical supply company from offices at Thames Ditton, Surrey. They were raided and a quantity of electrical capacitors, said by Customs to be nuclear triggers, was seized. After having his conviction overturned in 1994, Mr Daghir spent a further seven years trying to take his compensation claim to court. The reason for the delay was the tardiness of the authorities in making available documents helpful to his cause. Many of these papers were not disclosed in his original trial. One, a file note from GCHQ made by officer "D", said: "There is no GCHQ evidence (or I believe Secret Intelligence Service information) to connect these capacitors with an Iraqi nuclear programme."

The Foreign Office also advised Customs not to base a prosecution on the claim that the capacitors could be used only for nuclear weapons. Customs chose to ignore that advice and the Foreign Office's caution was not disclosed to Mr Daghir at his trial.

In a preliminary ruling yesterday the judge said that in Mr Daghir's case there was not "a sustainable argument that Customs and Excise should have obtained the documents from other government departments". The judge accepted the argument from Customs that at the time interdepartmental communications were the subject of Public Interest Immunity – in other words, they could be withheld from Mr Daghir's defence.

On appeal, the conviction was quashed because the judge told the jurors they could convict if they were satisfied the equipment was capable of military use – quite different from Customs' assertion they were specifically intended for nuclear weapons. Lord Chief Justice Taylor took less than three hours to throw out the conviction, saying that Mr Daghir had suffered "a grave miscarriage of justice".

Mr Daghir said he was especially anxious for his compensation claim to be heard by a jury, but that was barred by the judge. Mr Daghir said: "I can't work, I've devoted 11 years of my life proving my innocence. I have suffered what the Appeal Court judge said was 'a grave miscarriage of justice', yet I have nothing."

His solicitor, Lawrence Kor- mornick, said he was "extremely surprised and disappointed that the judge has ruled there are no questions for the jury to decide". Mr Daghir is now deciding whether he will appeal.