The attorney general Lord Goldsmith announced last December that the Serious Fraud Office (SFO) investigation into relations between the British arms manufacturer BAE Systems and Saudi Arabia was to be halted on the grounds of public interest and national security.
But the decision to end the probe into the 1980s al Yamamah arms deal sparked controversy, coming in the wake of reports that the Saudis had threatened to pull out of a subsequent £10 billion agreement to buy 72 Eurofighter jets from the defence company
In its latest report on human rights, the foreign affairs select committee said the government should make clear how it had responded to criticism from an international anti-bribery watchdog over its decision to abandon the SFO investigation.
The Organisation for Economic Cooperation and Development (OECD) has said that ministers failed to act in accordance with an anti-bribery convention in dropping the SFO probe, which had been examining claims that BAE paid bribes to Saudi Arabia to secure the al Yamamah deal.
The foreign affairs select committee warns in its report: "We conclude that the government's decision to halt the inquiry into the al Yamamah arms deal may have caused severe damage to the reputation of the United Kingdom in the fight against corruption."
"There may also be an argument that it has weakened the United Kingdom's ability to take firm action against Saudi Arabia in a range of fields, including human rights," the report adds.
MPs recommend that ministers should use the government's "close relationship" with Saudi Arabia to set "measurable and time-limited" targets with the country in relation to specific human rights objectives such as women's rights, the use of torture and the death penalty.
The foreign affairs committee also warns that there has been a "further grave deterioration" of human rights in Iraq as a result of the worsening security situation there and recommends that the British government does more to tackle the problem in light of a rising number of executions and a lack of fair trials in the country and amid claims that some Iraqi ministers are responsible for abuses.
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