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BAE Systems: corrupt clientele and historic dodgy deals?

What is this report? BAE Systems, benefiting from global conflicts and threats of war, has seen recent unprecedented profit growth, highlighting the lucrative nature of the arms trade amidst global instability. This 2024 report – “How BAE Systems helped arm half the world” – from Action on Armed Violence investigates BAE Systems’ secretive client list spanning the previous decade, and scrutinises the ethical implications of arming countries with dubious human rights records and unstable political regimes.

BAE Systems claims they “comply fully with all relevant export control laws and regulations in thE countries in which we operate and have a zero tolerance policy regarding corruption in all its forms”. However, as an arms company, they operate in an ecosystem that is of concern, not least when it comes to corruption.

An estimated 40 percent of all corruption cases in international trade are linked to the sale of arms. For years, international anti-corruption agencies, non-profit organisations, and investigative journalists have warned about the lack of transparency and accountability in the wider arms trade, an industry beset by high levels of secrecy, poor governance systems, and strong ties with top political figures. 

The UK’s arms exports are no exception. 

Whilst it claims its current slate of operations appears free from corruption, BAE Systems, as the UK’s leading arms manufacturer, has been at the centre of some of the most infamous British corruption scandals of the past decades, with evidence of their past dealings reliant on securing multi-million arms deals from illegal bribes.

BAE Systems’ involvement in the al-Yamamah arms deals with Saudi Arabia between 1985 and 2007, for example, as well as its arms sales to South Africa at the turn of the century are notable. In both cases, it is alleged that bribes were made to top political figures in Saudi Arabia and South Africa, shedding light on the connection between corrupt politicians and dubious arms deals.

This brings us to ask – are BAE Systems selling to other corrupt governments, and how concerned should we be about the transparency of the company’s overall dealings? 

After all, AOAV has evidence that BAE Systems’ products have ended up in a considerable number of countries with high corruption levels. This does not mean BAE Systems is involved in corruption but if sales to these countries have occurred then this UK company is either arguably inadvertently helping those corrupt governments keep in power, through arming them, or gives them a veneer of acceptability by having such an arms giant willing to sell to them.

Of all the countries demonstrating evidence of having a definite relationship with BAE Systems over the past decade, over half (55%) score lower than 50/100 on Transparency International’s Corruption Perception Index (CPI). Of those countries, a large majority (82%) scored lower than the global average (43/100) in 2022. 

The CPI is an initiative by Transparency International to quantify levels of public sector corruption to encourage transparency and accountability. The index uses a 0 (highly corrupt) to 100 (very clean) scale to annually rank countries and territories by aggregating data from thirteen databases that capture perceptions of corruption. 

The cross-comparison between this data and countries identified by AOAV as having entertained a relationship with BAE Systems over the last decade is illustrated in the following two figures: 

Figure 1 maps out countries exhibiting definite evidence of a military relationship with BAE Systems over the last ten years (to be added)

Figure 2 maps out countries with either a definite or reported relationship with BAE Systems over the last ten years (to be added)

Arming the Corrupt: Deals with Low-Scoring Countries

Again, none of this means that BAE Systems is involved currently in acts of corruption, but it is operating in countries where corruption is rife. Among BAE Systems' lowest-scoring clients mapped in Figure 1 are Iraq (23/100), Turkmenistan (19/100), Burundi (17/100), Venezuela (14/100) and Somalia (12/100).

Somalia, notably, is the lowest-ranked country on the CPI, out of a total of 180 countries. Unfortunately, the CPI does not break down every country’s score individually. However, one of the CPI’s thirteen source databases, the World Justice Project’s (WJP) Rule of Law Index, does. 

Venezuela, another country with a definite military trading relationship with BAE Systems' clients, is ranked the very last out of 140 countries on the WJP Index in 2022. This score is attributed based on eight factors, with Venezuela ranking lower than the global average in all of them. Venezuela specifically ranked last globally in three of the eight categories. These pertain to constraints on government power, the implementation of proper legal and administrative regulations, and the effectiveness of Venezuela’s criminal justice system. The Campaign Against Arms Trade (CAAT) recorded one approved export license applied for by BAE Systems for military goods to Venezuela in 2015, and BAE Systems in their 2023 Annual Report has confirmed the presence of a wholly-owned subsidiary in the country.

The number of low-scoring countries featured in BAE Systems' clientele increases in Figure 2. Bangladesh, for example, has a score of 25/100 on the CPI. Of the WJP Index’s eight categories, Bangladesh ranks lower than the global average in all eight categories. While the current nature of BAE Systems' business with Bangladesh is unclear, Bangladesh reportedly purchased Otomat Mk II missiles from MBDA for its navy in 2021.

Not (necessarily) corrupt countries, but corrupt dealings

Perceptions of corruption concerning the nations that BAE Systems sell to are not limited to the malpractice in the countries of sale. BAE’s own business conduct has in the past been of concern, and so we must hope they have reformed completely to exist, as they say, in a state where they "rigorously uphold our responsible trading principles and ethical standards and even if export licences have been approved, we do not proceed if our own strict criteria are not met."

The company today claims that "all export licence applications are thoroughly assessed, on a case-by-case basis, against internationally-sanctioned criteria and if granted, they are subject to ongoing review.” But past actions by the company cannot be omitted from this report just because they claim they are law-abiding in the present.

In recent years, several court cases against BAE Systems have shed light on a historic business ethos, alleging dishonest practices in their past and historic arrangements. Perhaps the most infamous and widely covered were accusations of corruption regarding the 1985 al-Yamamah £43bln fighter deal with Saudi Arabia. The Serious Fraud Office’s (SFO) investigation into the alleged bribery of around £6bln to members of the Saudi royal family was, however, shelved in 2006 by Tony Blair’s government. Parallel investigations looked into BAE Systems' contracts with Chile, the Czech Republic, Romania, South Africa, Tanzania, and Qatar. 

The SFO’s Tanzania investigation from 2004-2010 for example, saw a 2011 UK Parliamentary Inquiry determine that BAE Systems had allegedly paid £8mn to an agent to broker the deal of air-traffic control radar systems in 1999. It is further alleged that the sum was used by the agent to bribe officials in Tanzania to ensure the deal would go through. In 2012, the SFO ordered BAE Systems to pay £29.5mn earmarked for Tanzanian educational projects. 

Just four years later, it is claimed that BAE Systems allegedly used another agent, in this case Austrian aristocrat Count Alfons Mensdorff-Pouilly, to ensure the signing of a £1.6bn deal for Eurofighter jets to Austria in 2003. In a memo to BAE Systems, Mensdorff claimed to have “exerted pressure” through “aggressive incentive payments to key decision-makers, and heavy lobbying by the British, German, and Italian ambassadors.” The alleged involvement of these ambassadors is striking, not only as representatives of their countries, but - if true - as representatives of three weapons manufacturers, including BAE Systems. The resulting probe in 2017 brought by the Austrian Ministry of Defense was, however, not for improper influence through an agent but rather for reportedly misleading the state about the price, deliverability, and equipment outlined in the deal. It should be made crystal clear here that these are all allegations: the court dismissed the fraud investigation.

The allegations, however, continue. As recently as May of 2023, India’s Central Bureau of Investigation (CBI) filed a case against BAE Systems and Rolls Royce India for allegedly paying two Indian arms dealers around £100mn to secure the sale of 66 Hawk jet trainers to India in 2004. According to the CBI, the two arms dealers allegedly influenced Indian officials to approve the deal. BAE Systems has signed an integrity pact to discourage influence peddling and engaging agents and claims that they "comply fully with all relevant export control laws and regulations in the countries in which (they) operate."

BAE Systems rejects all claims of unethical behaviour

Things, at least according to the company, have changed. Almost a decade ago, BAE Systems claimed they were committed to “restore our [BAE Systems] reputation for ethical business conduct.” 

This report does not claim to reveal new evidence of BAE Systems' failure to realise that ambition. However, it stresses the need for vigilance both within the company and by the UK government. Although the majority of investigated deals were finalised in the late '90s and early ‘00s, accusations of corruption, namely through the alleged bribery of agents, still linger.

BAE Systems claims its house is now in order, but - given such lingering concerns and their refusal to list to AOAV the nations to which they sell - we have only to take their word on that. This report hopes that they are true to their word.

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