Return to an Address of the Honourable the House of Commons
dated 18 July 1996 for the Appendices to the Report of the Inquiry into the Export of Defence Equipment and Dual-Use Goods to Iraq and Related Prosecutions laid before The House on 15 February 1996*

Volume Two
Section D Arms and Defence-Related Exports to Iraq
Chapter 7 Other Allegations of Illegal Arms Exports to Iraq

Excerpt:
(IV) ASTRA HOLDINGS PLC/BRITISH MANUFACTURE AND RESEARCH COMPANY LIMITED/ASTRA PYROTECHNICS LIMITED

Background

D7.56 From 1971 to May 1988, British Manufacturing and Research Company Limited (BMARC) was the UK-based ordnance and ammunition manufacturing subsidiary of Oerlikon, a Swiss armaments manufacturing company. At this time, according to the Report made by company inspectors pursuant to an investigation into Astra Holdings Plc under Section 431(2)(c) of the Companies Act 1985 (the Astra Report), BMARC “had the only medium calibre ammunition production facility in the UK apart from RO [Royal Ordnance] and was a major manufacturer of a range of cannon, cannon mounts and ammunition.” *69

D7.57 On 24 May 1988 Astra Holdings Plc (Astra) *70 acquired BMARC from Oerlikon. The Astra Report records that the acquisition of BMARC by Astra had been originally intended to be completed by the end of October 1987. However the fall in the stock market in October 1987 had prevented Astra from raising the necessary finance by way of a share issue. Instead, in November 1987, Astra entered into a manufacturing agreement with Oerlikon enabling Astra to tender for MOD contracts and acquired from Oerlikon an option to acquire BMARC exercisable within 6 months. In April 1988 Astra exercised the option and the acquisition of BMARC was completed in May 1988. *71 On 5 June 1989 BMARC changed its name to Astra Defence Systems Limited before reverting to the name BMARC on 1 April 1991. *72

D7.58 A number of statements have been submitted to the Inquiry containing allegations that BMARC supplied or attempted to supply Iraq (and Iran), via diversionary routes, with arms and defence equipment during the period covered by the Inquiry’s terms of reference. Allegations have also been made about a former Minister, Mr Jonathan Aitken MP, and his involvement in facilitating the supply of arms and defence equipment as well as his involvement in what has been widely referred to as “Project Lisi”. *73 The Inquiry has examined such of these allegations as relate to matters falling within the Inquiry’s terms of reference, that is, allegations that the Government approved the export of arms or defence equipment to third countries in the knowledge that the exports were not intended for use in those countries but rather in Iraq.

D7.59 In examining these allegations, it has been necessary, inter alia, for the Inquiry to inspect a large number of files and documents held by Coopers & Lybrand, the receivers of Astra. *74 The task of inspection has been carried out on behalf of the Inquiry by Arthur Andersen, a firm of London accountants. *75 The results of their inspection are set out in two reports. *76 A number of files and documents that the Inquiry wished to inspect were missing and these are detailed in the first report prepared by Arthur Andersen. *77 The reports produced by Arthur Andersen highlighted those documents which Arthur Andersen considered might be relevant to the Inquiry. These documents were perused and considered by the Inquiry. None of the documents contain any evidence of Government approval or knowledge of exports of arms or defence equipment to Iraq, whether directly or via some other country, by Astra or any of its subsidiaries, including BMARC.

Endnotes:

*69 - paragraph 2.48, p17 of the Astra Report. Astra subsequently went into administrative receivership on 3 February 1992 together with eight of its subsidiaries. BMARC went into administrative receivership on 4 February 1992.

*70 - see also paragraph F3.19 et seq

*71 - paragraphs 2.49 and 2.50, p. 17 - 18 of the Astra Report

*72 - see the letter from the MOD Scott Inquiry Unit to the Inquiry dated 28 July 1993 (MOD/354)

*73 - Project Lisi is an issue presently being investigated by the Trade and Industry Select Committee of the House of Commons (“TISC”). See also paragraph D7.75 and associated footnote infra

*74 - The documents include documents originally seized by the MOD Police during their enquiries into allegations of corruption made against Astra and its subsidiaries

*75 - see the letter of instruction from the Inquiry to Arthur Andersen dated 19 July 1995 (AST/52) and Part C3(i) of the Appendix to the Report

*76 - see Ast/102, Ast/116 and Part C3(ii) and C3(iv) of the Appendix to the Report: see also paragraph B3.5 supra

*77 - see paragraph B3.5 supra and see also the letter from Coopers & Lybrand to the Inquiry dated 29 August 1995 (Ast/96)

* The Full report is available from The Stationery Office Ltd., PO Box 276, London, SW8 5DT.