The U.K. Serious Fraud Office was within its rights to end a probe of an arms deal between BAE Systems Plc and Saudi Arabia, the House of Lords ruled, overturning a lower court decision against the British government.

The House of Lords said former SFO Director Robert Wardle had the authority to call off his corruption probe. Wardle had cited threats to national security as justification.

Wardle ''received advice from a number of sources about the threat to national security if the investigation continued,'' Alan Rodger, one of five judges deciding the case said in the ruling from London. The SFO director had concluded ''British lives would be put at risk.''

Wardle halted the investigation in December 2006 when he was told that Saudi Arabia would stop cooperating with the U.K. on intelligence and security issues if the probe continued. The U.S. Justice Department is still investigating corruption allegations surrounding BAE's 43 billion-pound ($85 billion) Al-Yamamah contract with Saudi Arabia.

Today's decision is the result of the U.K. government's appeal of an April ruling by London's High Court directing the SFO to reconsider its decision to drop the probe.

BAE rose 12.5 pence, or 2.8 percent, to 452.75 pence in London as of 12:44 p.m. The shares have fallen 9 percent this year.

National Security

Two advocacy groups opposed to the arms trade, Campaign Against Arms Trade and Corner House, started the court action. Wardle didn't consider a treaty obligation by Britain to prosecute corruption cases, the groups said.

''In legal terms, this is it, but the outrage that this case has generated over the last few years won't go away,'' said Symon Hill, a spokesman for Corner House.

The groups alleged at hearings in February that Wardle may have ended the probe because Saudi officials threatened to cancel fighter-jet orders and end intelligence cooperation. BAE won a 4.43 billion-pound deal for 72 warplanes after the investigation was called off.

At a hearing earlier this month, SFO lawyer Jonathan Sumption said Wardle wasn't influenced by economic considerations, and based his decision solely on national-security concerns. Dropping a prosecution on that basis is permitted under international law, he said.

U.S. Sales

The SFO said it ''welcomed'' the ruling and the corruption probe will remain closed.

''The SFO's investigations into some of BAE's non Saudi activities will continue,'' the SFO said in an e-mailed statement. The agency investigates and prosecutes the most serious fraud cases in the U.K.

The groups brought the challenge as a ''judicial review'' last year, a process that examines the decision-making process used by U.K. agencies. If the court finds against a public body, it can be ordered to reconsider its decision. The agency is allowed to draw the same conclusion provided all procedures are correctly followed.

BAE said in an e-mailed statement it had no involvement in the groups' case against the SFO.

''The case heard was between two campaign groups and'' Wardle, the statement said. ''It concerned the legality of a decision made by the director of the SFO.''

Under Chief Executive Officer Mike Turner's leadership BAE has continued its transformation from an engineering company into one the world's largest defense contractors. BAE now generates 41 percent of its annual sales from the U.S. and Canada. Its products include armored vehicles used in Iraq and Afghanistan, as well as the Eurofighter Typhoon warplane.