Mr Dahdaleh, who has both British and Canadian nationality, was alleged to
have issued orders for the payments using a fax machine at his home in
Belgravia, central London.

In a case that implicated the highest echelons of Bahrani society, at a time
of growing political unrest in the Gulf kingdom, Mr Dahdaleh was alleged to
have authorised bribes to Sheikh Isa Bin Ali al-Khalifa – a member of the
Bahraini royal family, minister of oil and chairman of state-controlled
Alba.

Opening the case on November 5, Mr Shears said: “This case is about
corruption. It is corruption, we suggest, on a very large scale.”

However, the case due to run until next year swiftly fell apart.

First, the SFO’s key witness, Australian national Bruce Hall – the former
chief executive of Alba who had already pleaded guilty to a charge of
conspiracy to corrupt – “significantly changed his evidence from that
contained in his witness statement”, lawyers for the agency said.

Second, it emerged that the SFO had effectively outsourced its investigation
in Bahrain to lawyers from US law firm Akin Gump – an issue raised by the
judge last Thursday.

He noted that two of the firm’s lawyers, Mark MacDougall and Randy Teslik,
were representing Alba in a “hotly contested” civil lawsuit against Mr
Dahdaleh and could therefore have a conflict of interest – a point made by
the metals magnate’s legal team, which asked to cross-examine the pair.

Mr Shears told the court, however, that despite taking “every available step,
including a direct telephone conversation” between Mr Green and the Akin
Gump chairman Kim Koopersmith, “we have the unwillingness of two witnesses
to face cross-examination. That impacts both on fairness of the trial as
well as the prospects of conviction.”

Akin Gump, Mr MacDougall and Mr Teslik failed to respond to telephone calls
and emails requesting comment.

Outside the court, Neil O’May, lawyer for Mr Dahdaleh, said his client was
“overwhelmed and relieved” by the judge’s instruction that he be found not
guilty.

“He is concerned, and wishes those who have a supervisory role, within the SFO
and outside, to consider how it was that part of the investigation was
outsourced to a firm of American lawyers who refused to attend court to give
a full account of their involvement,” Mr O’May said.

Mr Dahdaleh, an acquaintance of Tony Blair and Lord Mandelson, had admitted
making payments to Alba managers. But he had pleaded not guilty to eight
criminal charges on the grounds the payments were “custom and practice” in
Bahraini culture and had been approved by a royal family member.

As his alleged offences preceded the 2010 Bribery Act, Mr Dahdaleh’s
prosecution was brought under its forerunner, Britain’s Prevention of
Corruption Act 1906. That allowed for a defence of “principal’s consent” –
outlawed under the new Act.

In an attempt to clarify Akin Gump’s role, an SFO spokesman said: “Alba in
Bahrain gave its documents to Akin Gump, the company’s lawyers. The SFO
framed specific requests to Akin Gump for that documentation and obtained
what was requested.”

The spokesman added that the agency had “also obtained evidence from other
sources. Faced with that evidence Bruce Hall was extradited from Australia
and pleaded guilty to a conspiracy with Victor Dahdaleh, Sheikh Isa bin Ali
al-Khalifa and others to corrupt. No aspect of this investigation was
outsourced.”

Mr Dahdaleh was charged with bribery in October 2011 during the tenure of the
SFO’s previous head Richard Alderman.

He was accused by MPs in March of “shocking” stewardship during a tenure that
included the collapse of the agency’s case against the Tchenguiz property
brothers, the sanctioning of £1m of unauthorised pay-offs to colleagues and
the loss of BAE Systems documents that subsequently turned up at an east
London cannabis farm.

Mr Green declined to make any comment on the Dahdaleh case or its cost to the
taxpayer.