Tony Blair, British prime minister at the time, took responsibility earlier this year for halting the investigation, saying it threatened national security interests.
However, lawyers for the Campaign Against Arms Trade (Caat) and the anti-corruption group, Corner House Research, have now argued that the decision to stop the inquiry was unlawful under the Organisation for Economic Cooperation and Development (OECD) anti-bribery treaty.
The full extent of the deal was never revealed but it was widely believed to be Britain's largest-ever export agreement.
As recently as September, Saudi Arabia signed a $8.84 billion agreement with Britain to buy 72 Eurofighter Typhoon jets from BAE.
|Saudi Arabia bought 72 Eurofighter Typhoons |
from BAE as recently as September [AP]
After a brief hearing on Friday, the UK court gave the two pressure groups permission to seek a full judicial review of the SFO's decision.
Lord Justice Alan Moses said that the case concerned "a question of great public importance" and "cries out for a hearing".
"This closely involves the judicial process and the criminal justice system in this country of which the guardians are the judiciary and not the government," he said.
Dinah Rose, a lawyer for Corner House and Caat, told the court that the inquiry was called off shortly after the SFO had obtained search orders for Swiss bank accounts.
"That was the point at which the acute pressure seems to have been applied," she said.
Moses, sitting with Justice Stephen Irwin, said he was passing no comment on the arguments put forward by Caat and Corner House ahead of the full hearing.
"This is something that the judges are here to decide and in my view requires a full public hearing and consideration," he said.
BAE was not available for immediate comment, but has previously denied all accusations of wrong doing.
Prince Bandar bin Sultan, former ambassador to the US and now head of Saudi Arabia's National Security Council, has also denied that he profited from the deal.
In the meantime, the US justice department is continuing its own investigation, which started in June and is likely to end in February, into BAE's compliance with anti-corruption laws.