In May last year, in the heart of medieval Prague, Michael Zantovsky's mobile phone rang. Zantovsky, a former ambassador and old friend of Vaclav Havel's, occupied a key post in Czech politics. The defence committee he chaired had just recommended voting against a crucial bill. The anonymous man in a call box wanted to change Zantovsky's mind.

According to a statement the outraged politician gave police the next day, his caller offered £1m towards party funds to buy the votes of Zantovsky and his seven senators in the liberal ODA party. The vote was to fund the impecunious Czech republic's purchase of £1bn worth of Gripen fighters.

As Senator Premysl Sobotka arrived at the chamber to cast his own vote against the bill, he too was approached by two men on the pavement. "It was half an hour before the session began," he recalls. "They asked me how I intended to vote. I told them I'm voting against. They asked me if I needed any money or investments for my region in Liberec. I refused it."

Senior figures in all three parties who eventually voted against the deal - Zantovsky's ODA, Sobotka's conservative ODS, and the smaller Freedom Union - say they were offered financial inducements in one form or another. "Some of my colleagues were also contacted," says Sobotka. "This was going on across the political spectrum."

The ruthless contest to force the Czechs into one of the biggest arms contracts in central Europe since the collapse of communism brought a private row to a head between the US and Britain.

Documents obtained by the Guardian show how the US assistant secretary of state, Anthony Wayne, met and confronted the MoD permanent secretary, Sir Kevin Tebbit, in July.

Wayne made what Sir Kevin called "repeated but unsubstantiated allegations of corrupt practice by BAE Systems in their dealings with the Czech Republic".

Other documents obtained by the Guardian disclose that the US was relying not only on protests from disappointed American commercial rivals, but on intelligence reports from the CIA to the US department of commerce.

Sir Kevin's "sharp response", as a commerce department official put it in an email, was to claim the allegations had been investigated, and to refuse to do anything further: "Unless you have any information to provide in the form of firm evidence, we need to draw a line under this subject."

But he never reported the information to the police, who should have investigated what were allegations of criminal offences under the Anti-Terrorism Act. The act, passed the previous year under US pressure, makes it a crime for Britons or British companies to bribe foreigners abroad.

The row with the US had been rumbling for more than a year. In a highly unusual move, all four of BAE-Saab's rivals for the Czech order - Lockheed, Boeing, a French firm, and the Eurofighter consortium - had pulled out of the bidding the previous May.

"We all had similar concerns," one US official says. "You had a process that was not transparent."

BAE says this is sour grapes. It denies having anything to do with the vote-buying attempts. "We know what we're doing and we consider that we did nothing wrong," says Steve Mead, BAE's country director in the Czech Republic. "We don't have any lobbying companies. We do it ourselves."

Senator Sobotka counters that "the lobby working for the Gripen was huge", a view shared by western business and diplomatic observers in Prague. "The campaign was very aggressive," says one.

The BAE spokesman did concede that the complex set of business arrangements surrounding the aircraft purchase involved "a huge network of people including Czech banks. They are not lobbying for us. But were they networking? Why not?"

Prague's special anti-corruption police said they were unable to identify the anonymous phone caller, although they concluded a bribery attempt had indeed taken place.

"It doesn't mean that [the investigation] is over. It can start again any time," Jiri Kara of the state prosecutor's office told us. But faith in such police units is low.

Corporate favours

BAE also offered corporate favours to the boss of an influential television station to help its campaign. The private Czech television station TV Nova was in financial difficulties in 2001. In a leaked email, James Caldwell from BAE's finance department offered to introduce the owner of the troubled station, Vladimir Zelezny, to the bank which was financing the BAE Gripen bid.

Caldwell wrote: "Before the Czech Republic entered Nato, TV Nova produced and aired shows supporting Czech membership of the alliance, which influenced a lot of people. With regard to the current atmosphere in the Czech Republic, where the fighter issue is being actively discussed, we should not underestimate the seriousness and value of Mr Zelezny to our campaign."

BAE said: "Mr Zelezny asked us to help to arrange a meeting. We were never going to be party to the meeting or any financing for Mr Zelezny."

BAE was also fined $10,000 (£6,000) by the Czech authorities for illegally buying newspaper space to promote the arms deal.

The whole Czech fighter deal is currently shelved, with US rivals trying to thwart it and the Czechs pleading poverty. But the British defence secretary, Geoff Hoon, was recently back in Prague lobbying for a new, cheaper deal that would still help BAE to lease the Czechs a fleet of second-hand Tornados.

BAE also secured a controlling interest in the Czech Republic's biggest arms trading company to boost its bid.

Whether that money was well spent is a moot point given the collapse of the deal. This week, the new defence minister, Miroslav Kostelka, said his government would not be buying any fighter aircraft for at least 10 years.

Battling for the fighter market

BAE Systems employs 40,000 people on 70 sites in Britain, with a further 60,000 around the world. Its largest British factory is in Warton, Lancashire.

The company sells military equipment worth around £13bn a year. It is believed to be pursuing a merger with one of the large US defence companies.

The Gripen combat jet is touted by BAE as the "world's most modern aircraft" and it is manufactured and sold by a company owned jointly by BAE and the Swedish company Saab.

According to BAE, it has already sold 204 Gripen planes to Sweden and 14 to Hungary. Controversially, it has also sold 28 to South Africa.

In April BAE suffered a heavy blow when Poland opted to buy 48 new F-16 fighters from the US firm Lockheed Martin at a cost of £2bn instead of the Gripen planes.

BAE accused the American government of resorting to strong-arm diplomatic tactics to persuade the Poles to buy the F-16s.

BAE trumpets the multi-million jet as extremely versatile. Previously, combat planes were designed to either shoot down other jets, strike targets on the ground, or to carry out reconnaissance.

According to BAE, the Gripen is equipped with all the latest technology, and so it can perform all types of missions.

"Simply by pressing a few buttons, the pilot can reconfigure the Gripen's systems in flight for it to be able to operate in more than one role during the same mission."

With acknowledgements to Rob Evans, Ian Traynor, Luke Harding, Rory Carroll and The Guardian, UK.