* Businessman on trial in UK over alleged Bahrain bribery
* Defence say Bahraini prime minister approved payments
* Saudi witness says knew nothing of alleged bribes
By Estelle Shirbon
LONDON, Dec 2 (Reuters) - A British court saw documents on Monday purporting to show that Bahrain's prime minister had direct influence over the affairs of aluminium smelter Alba when it was making deals now at the heart of a major corruption case.
The documents were shown by a lawyer for British-Canadian businessman Victor Dahdaleh, who is on trial accused of paying some $67 million in bribes to former Alba managers in return for a cut of contracts with suppliers worth more than $3 billion.
One of Britain's biggest corruption cases for years, the trial has opened a rare window onto business practices normally shielded from public view in secretive Bahrain and comes at a sensitive time of political unrest in the tiny Gulf kingdom.
London-based Dahdaleh, 70, has pleaded not guilty to eight criminal charges brought by Britain's Serious Fraud Office (SFO) in relation to events between 1998 and 2006 at Bahraini state-controlled Alba, the world's fourth-largest aluminium smelter.
Defence lawyer Nicholas Purnell has sought to persuade the jury that the payments made by Dahdaleh were part of Bahraini "custom and practice" and were approved by royal family member Sheikh Khalifa bin Salman al-Khalifa, the prime minister.
Reuters was unable to reach Sheikh Khalifa for comment.
During cross-examination of a witness, Purnell showed the court several letters from early 2003 in which Alba's then- chairman, Sheikh Isa Bin Ali Al Khalifa, sought and obtained the prime minister's approval for key business decisions.
Purnell told the court Sheikh Isa, also a member of the royal family and then Bahraini oil minister, was married to the prime minister's sister and that the two men were close.
One of the issues discussed in the letters was a proposed strategic cooperation agreement with U.S. metal giant Alcoa.
The Alba-Alcoa relationship is central to the trial because the bulk of the bribes allegedly paid by Dahdaleh were linked to the renewal of a multi-billion-dollar contract for long-term supply of the raw material alumina by Alcoa to Alba.
Sheikh Isa, the main recipient of the alleged bribes, has denied any wrongdoing in a statement issued by his lawyer. Alcoa has declined to comment on the case during the trial. Alba, now under new management, is cooperating with the SFO.
Monday's witness, Alba board member Mutlaq Al-Morished, told the court that Sheikh Isa had never informed the board that Bahrain's prime minister had a role in Alba's affairs.
Al-Morished has sat on the Alba board since 2003 as one of three representatives from Sabic, a huge Saudi state-controlled industrial group that is a minority shareholder in Alba. Al-Morished is Sabic's chief financial officer.
Sheikh Isa is now chairman of Gulf Petrochemical Industries Co. (GPIC), a group jointly owned by Bahrain, Kuwait and Saudi Arabia. The Saudi stake of 33.3 percent is held by Sabic.
Al-Morished said he had known nothing about payments by Dahdaleh to Sheikh Isa and had heard of them only years later, adding: "It's totally unacceptable and we never knew ... It makes me sick." (Additional reporting by William Maclean in Dubai; Editing by Gareth Jones)