The Scorpions are negotiating a complex, dual-country amnesty agreement with French authorities to cover key figures in the arms deal, in an effort to strengthen their investigation into SA's R40bn arms deal, sources close to the investigation said yesterday.

Should agreement be reached, the effect could be serious for Durban businessman Schabir Shaik, who has been charged with corruption in connection with the arms deal, and could even result in the charges being extended to include Deputy President Jacob Zuma.

But failure to achieve an agreement with the French authorities could equally make it impossible to bring a case against Zuma, and it would weaken the case against Shaik.

The deal would involve giving two key figures, Alain Thetard and Jean Paul Perrier, indemnity against prosecution simultaneously in both France and SA, on condition they testify in the Shaik trial, or possibly answer questions in relation to the case.

The Scorpions have sought the co-operation of the two employees of French arms company Thales before, but without success. However, the French government has since appointed a magistrate, Edith Boisette, a financial specialist, to assist with the case.

Sources close to the arms deal suggest that Boisette is close to holding a formal hearing into the issue, and this may prompt the two employees to cut a deal.

But there is as yet no certainty about the outcome, and the process is fraught with complexities. One observer said it was not yet clear that the French had decided to give up Thetard and Perrier.

Boisette is familiar with the intricacies of the deal, and has assisted the Scorpions once before. In 2001, she ordered a raid of Thales' offices in Paris. The company has denied any involvement in corruption.

The evidence of Thetard is crucial, since the case against Shaik is based largely on a fax he is alleged to have written. Confirmation of the contents of this fax, the reasons for its existence and its integrity are all crucial in the case against Shaik.

Richard Young, MD of C²I², which was a losing bidder in the arms deal, said the testimony of Thetard could be "the thread that collapses the whole spider web". But Young, who has long claimed his firm lost out because of flaws in the process, said he was concerned that the Scorpions were going for the wrong person.

In Young's opinion, Zuma should be given indemnity from prosecution for testifying against Thetard, rather than the other way around.

A spokesman for the French embassy in Pretoria, Jean Marie Lebon, intimated that the embassy had not been kept in the loop on the question of indemnity against prosecution. But he acknowledged that this appeared to have been the Scorpions' intention on previous occasions.

With acknowledgements to Tim Cohen and the Business Day.