The Serious Fraud Office (SFO) acted unlawfully when it abandoned its investigation into alleged Saudi Arabian slush fund payments at BAE Systems, the high court has ruled.

The SFO halted its corruption probe in December 2006 after pressure from the government, citing national security concerns.

Tony Blair’s administration said Saudi Arabia was threatening to withdraw its support for counterterrorism operations unless the investigation was dropped.

The aborted investigation centred on BAE’s al-Yamamah contract, a £43 billion deal signed in 1995 to supply jets and other arms to Riyadh.

An SFO statement at the time said: “This decision has been taken following representations that have been made both to the attorney general and the director of the SFO concerning the need to safeguard national and international security.

“It has been necessary to balance the need to maintain the rule of law against the wider public interest.

“No weight has been given to commercial interests or to the national economic interest.”

An SFO spokesperson on Thursday said the office was preparing to issue a response to the high court ruling.

BAE Systems reacted by insisting it “played no part” in the decision to probe the al-Yamamah probe.

“The case if between two campaign groups and the director of the SFO,” a spokesperson said.

“It concerned the legality of a decision made by the director of the SFO.”