Goldsmith cleared over BAE claims

The payments of more than £1bn were allegedly received by Prince Bandar bin Sultan, the former Saudi ambassador to the United States, from BAE Systems for setting up the £40 billion Al Yamamah arms deal in the 1980s with the full knowledge of the Ministry of Defence.

The Guardian reported that when the Organisation for Economic Co-operation and Development (OECD) - the world's anti-corruption watchdog - tried to look into the deal earlier this year, the details were not disclosed by British officials.

Lord Goldsmith strongly denied that he had been responsible for ordering the information to be withheld.

The Serious Fraud Office confirmed its decision in a statement. It said: "The decision as to what information should be given to the OECD about the investigation was made by the SFO."

"The information provided by the SFO was as full as possible, having regard to the need to protect national security."

The statement said that SFO director Robert Wardle also reiterated that he made the decision to discontinue the original investigation for reasons of national security and was not pressurised to do so by Lord Goldsmith.

Prince Bandar has issued a statement denying that he had received any "kickbacks" or improper payments.

He said that the payments - said to be up to £120 million a year - were properly made to the Saudi Ministry of Defence and Aviation under the terms of the Al Yamamah deal.

The OECD began looking into the deal after a investigation by the Serious Fraud Office was suddenly halted last year after Prime Minister Tony Blair warned that the Saudis were threatening to break off intelligence and security co-operation.