The Labour Government could soon be faced with a stark choice: to co-operate with the US department of justice’s investigations into the BAE bribery allegations, or risk reciprocal co-operation and intelligence-sharing with the US.

Those who’ve been following the biggest scandal of Labour’s time in office – and, if you haven’t, why not visit the Lib Dem’s Corruption is a Crime website – will know that the US authorities began an inquiry last year into the £2bn payments made by BAE to the Saudi royal family and its agents in the 1980s (with the complicit approval of Margaret Thatcher’s Tory government) in order to clinch the Al Yamamah arms deal.

It was left to the US authorities to find out if Britain had breached international law after Tony Blair intervened to halt the Serious Fraud Office’s two-year investigation. This was on the brink of bringing charges which, Mr Blair argued, would have imperilled ‘national security’ if the Saudis had withdrawn co-operation over terrorist activity – although this argument was blown out of the water when it was refuted by Sir John Scarlett, head of MI6.

But now, according to today’s Guardian, the department of justice has “formally demanded that Britain hand over all evidence of secret payments the company made to members of the Saudi royal family to secure huge arms deals.” The report continues:

If ministers refuse to cooperate, they will face a fresh international crisis. The OECD, which polices international anti-bribery treaties, has already accused Britain of potentially breaching those treaties.

If British ministers defy the justice department, this could go on to endanger reciprocal cooperation and intelligence-sharing with the US. Britain depends far more heavily on Washington than it does on Saudi Arabia. One senior source close to the US department of justice told the Guardian: “Britain’s definition of national security might have to change under these circumstances.”

This is the first test of the new Prime Minister’s handling of foreign policy. Will Gordon Brown follow his Labour predecessor’s slippery example, and allow evidence of corruption and bribery to be suppressed? Or will he stand up for the rule of international law, and ensure it is applied rigorously in the UK?

As has become customary, the questions will be put in Parliament by the Lib Dems – as the Tories maintain their placid silence – who have “scheduled another opposition day debate in an effort to smoke out the prime minister’s position.” The paper quotes the party’s deputy leader, Vince Cable:

“Gordon Brown has made much fanfare about promising a more open approach to government, but if he was serious, he would find a way of opening the lid on the secrecy surrounding this murky deal.

“Allegations that the British government has been complicit in large-scale corruption are incredibly serious. It is profoundly unsatisfactory to invoke national security as the reason for this government’s refusal to pursue either legal action or parliamentary oversight.”