Although the Foreign Secretary, when exercising the power under section 1(1) of the Overseas Development and Co-operation Act 1989 to provide financial aid for projects abroad, may take into account political considerations, the power must be exe rcised for the purpose of promoting an economically sound development.
The Divisional Court declared that the Foreign Secretary's decision in July 1991 to provide aid from the British Aid and Trade Provision to fund the Pergau dam project in Malaysia was unlawful.
Section 1(1) of the Overseas Development and Co-operation Act 1980 provides: "The Secretary of State shall have power for the purposes of promoting the development or maintaining the economy of a country or territory outside the United Kingdom, or the welfare of its people, to furnish any person or body with assistance, whether financial, technical or of any other nature."
In 1988, two British companies indicated interest in the Pergau dam project and sought overseas aid from the ATP under section 1 of the 1980 Act. In March 1989 the Prime Minister, Margaret Thatcher, met the Malaysian Prime Minister, Mahathir Mahatir, in London and made an offer of ATP support for the project, conditional on a full, economic appraisal.
The Overseas Development Administration's appraisal of the project was that it was uneconomic and did not meet criteria for aid funds.
The accounting officer's view was that the project was an abuse of the aid programme because it was uneconomic and not a sound development project.
In July 1991, the Foreign Secretary, against that advice, approved ATP support for the Pergau project on the basis that offers of financial support had already been made and withdrawal of that support would be detrimental to political and commercial relations with Malaysia. The applicant, a non-partisan pressure group concerned with the misuse of aid money, applied for judicial review of the Foreign Secretary's decision on the ground that the power to grant aid under section 1(1) was to be exercised forsound development projects.
Nigel Pleming QC and Owen Davies (Bindman & Partners) for the applicant; Stephen Richards (Treasury Solicitor) for the Foreign Secretary.
LORD JUSTICE ROSE said that the importance of the issue raised, the likely absence of any other responsible challenger and the role of the applicant in giving advice, guidance and assistance, with regard to aid, pointed to the conclusion that the applicant had a sufficient interest in the matter to make the application. …