The Police Complaints Authority has criticised the Metropolitan Police over the way it arrested the Harrods owner, Mohamed al-Fayed, nearly three years ago.

Mr al-Fayed and five of his staff were detained in March 1998 after jewels disappeared from a safety deposit box at the store, owned by his business rival Tiny Rowland.

A number of gemstones disappeared from the box after break-ins at Harrods in 1995.

Tycoon Mr Rowland accused Mr al-Fayed of breaking into the box, and although he completely denies this, Mr al-Fayed eventually paid out �1.4m in damages.

The Harrods boss and five of his employees were arrested during the police investigation into the alleged thefts.

But the Police Complaints Authority has now ruled that the men should not have been detained before officers looked into payments made by Mr Rowland to the former security chief at the store, Bob Loftus.

It also said the police failed to carry out a thorough investigation.

'Incalculable damage'

Mr al-Fayed paid the damages after a High Court battle, saying that although he knew nothing about the thefts, as owner of the store he had responsibility for the loss of the items.

He said he was delighted with the authority's ruling.

"These arrests should not have been made. The allegations of theft were false," he said.

"The damage to me and to various members of Harrods staff caused by the wrongful and wholly unwarranted arrests is incalculable."

A Metropolitan Police spokeswoman said the officer involved had retired and would not be disciplined.

Complaints against two other officers are still being considered by the Home Office.