Senior prosecutor Kim Hoon said the investigation was still continuing and concerned Favre d'Echallens and three South Koreans who were charged with him.

"The probe could be wrapped up in two to three weeks and technically the trial could start then. It will probably get under way next month," he told AFP.

Favre d'Echallens was accused of obtaining classified information from a researcher at South Korea's Agency for Defense Development (ADD), the government-run research organization.

The French businessman is being held in Daejon, a provincial city 160 kilometers (100 miles) south of Seoul, which serves as the headquarters of ADD, responsible for developing radar systems for South Korea's new generation of warships.

The classified information was allegedly obtained by the Frenchman through a Korean consultant identified only as Park, a former vice director of the ADD.

The consultant and one researcher were arrested for leaking the confidential documents. Another has been charged and will stand trial but has not been detained.

"The Frenchman paid 480 million won (500,000 dollars) to the consultant as a consulting fee," said Kim. "He is suspected of making the payment in return for receiving military secrets and related information."

Kim said that if the court upholds both counts against the Frenchman he could be sentenced to a maximum 15 years in jail.

"This is the first (judicial) case in South Korea in which military secrets were leaked to a foreign arms dealer," he said.

Thales, a defense and electronics company that is one-third owned by the French government, expressed surprise and regret at the arrest.

"Thales believes that it has fully complied with all relevant Korean regulatory procedures. We have been fully cooperating with the investigation," said spokesman Christophe Robin.

He said that Favre d'Echallens had obtained documents in good faith and was unaware that they were classified.

Thales said that it had enjoyed a trouble-free 30-year relationship with the South Korean military. It said that it would continue to cooperate with the investigation.

International defense firms are in the hunt for lucrative contracts here as South Korea upgrades its military as part of President Roh Moo-Hyun's drive to create a defence capability less reliant on the United States. The military budget rose 12 percent to 23 trillion won last year.

Thales won a contract in 2004 for a new South Korean surface-to-air missile system that is part of the military upgrade. Also included is the so-called FFX project to build 24 frigates by 2020, worth 2.4 trillion won.

Though the bidding process has yet to start, Thales was among international defense firms expected to compete for a contract to supply the ship radar systems.

But South Korean prosecutors launched an investigation in January over allegations that former and current researchers were leaking information on the military procurement projects.

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