The Serious Fraud Office's decision to drop its investigation into alleged bribery and corruption involving arms deals between BAE Systems and Saudi Arabia was overturned by the High Court today.
The ruling was an extraordinary victory for anti-bribery pressure group Corner House Research and the Campaign Against Arms Trade (CAAT).
The Serious Fraud Office (SFO) investigation arose out of BAE's #43 billion Al-Yamamah arms deal with Saudi Arabia in 1985, which provided Tornado and Hawk jets plus other military equipment.
In December 2006, the then attorney general, Lord Goldsmith, announced that the investigation into the arms company was to be discontinued.
Tony Blair, prime minister at the time, said that the Saudis had privately threatened to cut intelligence co-operation with Britain unless the inquiry was stopped.
Today Lord Justice Moses and Mr Justice Sullivan, sitting at the High Court in London, ruled that SFO director Robert Wardle "was required to satisfy the court that all that could reasonably be done had been done to resist the threat.
"He has failed to do so."
Although the court ruled the SFO decision unlawful, it made no formal orders today and will consider what orders to make at a further hearing.
It is understood that the most likely course will be that the SFO will have to reconsider its decision. Documents released to the court alleged that threats had been made by the Saudis to make it easier for terrorists to attack London by holding back security information.
The judges heard investigators were told there could be "another 7/7" with the loss of "British lives on British streets".
Prince Bandar, the head of the Saudi national security council and son of the crown prince, was alleged to be behind the threats.
He has been the subject of accusations that he took more than £1 billion in secret payments from BAE. The judge said of the director and his reaction to the threats: "He submitted too readily because he, like the executive, concentrated on the effects which were feared should the threat be carried out and not on how the threat might be resisted.
"No one, whether in this country or outside, is entitled to interfere with the course of our justice. "It is the failure of Government and the defendant (SFO director) to bear that essential principle in mind that justifies the intervention of this court."
The judges said they had intervened "in fulfilment of our responsibility to protect the independence of the director and of our criminal justice system from threat.
"On December 11 2006 the prime minister (Tony Blair) said this was the clearest case for intervention in the public interest he had seen. We agree."
Lawyers for Corner House and CAAT had argued that the SFO decision to stop the investigation was tainted by Government concerns about trade with Saudi Arabia and diplomatic considerations.
They also accused the British authorities of giving in to blackmail and breaking anti-bribery treaties. Mr Blair said the decision was taken because of national security and was not linked to commercial interests. But Corner House said a letter before the court revealed that Mr Blair's "concern" was over possible harm to business negotiations, in particular the major deal for Britain to supply Typhoon aircraft to the Saudis.