LONDON (AFP) - Weapons giant BAE Systems failed to pay sufficient attention to ethical standards in doing business, according to an independent report published on Tuesday.

BAE has faced allegations it made payments to help win a major arms deal with Saudi Arabia in the 1980s, although the company maintains it has done nothing that would constitute a criminal offence.

However, the report said Tuesday that BAE's reputation continued to be tarnished by allegations of past unethical conduct.

"Critically, both the chairman and chief executive, in discussions with us, acknowledged that the company did not in the past pay sufficient attention to ethical standards and avoid activities that had the potential to give rise to reputational damage," the report said.

This had "contributed to the widely held perceptions that it was involved in inappropriate behaviour," it said.

The report was compiled by a four-strong independent committee headed by Lord Harry Woolf, the former Lord Chief Justice of England and Wales, which was appointed last year to review current policies and practices at the defence firm, although its mandate did not cover the firm's past conduct.

The committee recommended BAE implement a global code of ethical business conduct, as well as carry out a regular, external audit of its business conduct.

In response, the British military equipment maker welcomed the report and said it would act on the committee's findings.

"The company will carefully study the report's contents, to understand the detail of its conclusions and remains committed to acting on all of the committee's recommendations," BAE said in a statement.

BAE was at the centre of a political storm in 2006 when the British government abandoned an investigation into allegations the firm had paid bribes to secure a 1985 deal worth 43 billion pounds to provide fighter jets to Saudi Arabia.

Explaining the move, then prime minister Tony Blair said pursuing the probe into the Al-Yamamah deal could threaten intelligence links at a key point in the "war on terror."

But following a campaign by anti-corruption activists, London's High Court last month overturned the decision to abandon the probe.

Judges said the Serious Fraud Office, a government department, had "unlawfully submitted" to "blatant threats" from Saudi Arabia in halting the investigation.

The SFO has since been given permission to appeal that ruling in the House of Lords, the country's highest court.

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