Ministers on Thursday night vowed to drive through unprecedented statutory powers to shut down investigations on national security grounds, just hours after the High Court said the government had broken the law by scrapping a probe into arms deals between BAE Systems and Saudi Arabia.

Two top judges delivered a fierce rebuke to the government for “failing to recognise the rule of law” and allowing a foreign nation to “pervert the course of justice” in a case that triggered global condemnation.

“So bleak a picture of the impotence of the law invites at least dismay, if not outrage,” said Lord Justice Moses in the High Court in London, as he ruled that the Serious Fraud Office had illegally allowed threats by Saudi officials to derail the bribery probe, which was scrapped in December 2006.

The judge is expected to order the SFO to reconsider its decision to stop the case, which has since spawned probes by the US Department of Justice, Swiss authorities and others. The SFO, which is still investigating allegations of bribery against BAE in six other countries, said it was considering its response but Whitehall officials said they expected it would challenge such a decision.

The SFO suspended its bribery probe into BAE’s “Al Yamamah” arms programme with the Saudi government – apparently after threats from Prince Bandar bin Sultan, former Saudi ambassador to Washington, that Riyadh would withdraw co-operation on intelligence and cancel the £20bn deal with Saudi Arabia to supply 72 Eurofighter Typhoons.

The Saudi intervention came after it became clear the Serious Fraud Office was about to obtain access to Swiss bank accounts that investigators thought were linked to payments to agents.

Prince Bandar allegedly received more than £1bn of payments from BAE. The company and Prince Bandar have both denied wrongdoing.

In his judgment, Lord Justice Moses said that the threat was made directly to Jonathan Powell, chief of staff to the then prime minister Tony Blair. The government did not challenge reports that Prince Bandar made the threats, telling the court to base its judgment on “the facts alleged by the claimants”.

The judgment later stated “Had such a threat been made by one who was subject to the criminal law of this country, he would risk being charged with an attempt to pervert the course of justice.” Prince Bandar did not participate in the case.

Confidential documents released during the case showed that, following the Saudi warning, Mr Blair urged the scrapping of the probe in spite of a warning by Lord Goldsmith, then attorney-general, that it would send a “bad message”. The former prime minister also resisted suggestions that BAE might be allowed to plead guilty to lesser offences.

The ministry of justice said on Thursday it would press on with a bill to give the attorney-general statutory powers to block corruption investigations on national security grounds. In this case, the government could only pressure the SFO.

Corner House Research, one of the two pressure groups that brought the High Court case, said the proposals were a “cynical” response.

BAE Systems declined to comment on a case in which it said it had “played no part”.

Lord Justice Moses told the court. “No-one, whether within this country or outside, is entitled to interfere with the course of our justice. We intervene in fulfilment of our responsibility to protect the independence of the director and of our criminal justice system from threat.”

The government declined to comment on Thursday night.

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