OTTAWA - The judge heading a public inquiry into the Mulroney-Schreiber affair has added his voice to a chorus of disbelief over the millions in lobbying fees shelled out by a German firm hoping to do business in Canada.

Justice Jeffrey Oliphant, in comments from the bench Thursday, characterized a tentative agreement reached by Thyssen AG with the federal government in 1988 as legally "meaningless" -- and wondered why anyone would pay for the privilege of signing it.

At issue was the so-called Bear Head project, in which Thyssen proposed to set up a plant in Cape Breton to build and export armoured military vehicles.

The project has been the main focus of the inquiry into financial dealings between former Conservative prime minister Brian Mulroney and businessman Karlheinz Schreiber.

Thyssen and Mulroney's government signed a vague "understanding in principle" in September 1988 that wasn't legally binding and didn't commit Ottawa to buy any Thyssen vehicles.

But the document was worth $6.5 million in commissions and forgivable loans to Schreiber, who later shared part of the money with other lobbyists who enjoyed close ties to the federal Tories.

Oliphant minced no words as he intervened in Thursday's hearing to put a series of pointed questions to Schreiber.

"Were you aware that the understanding in principle was a meaningless document in terms of any obligation on the part of the government of Canada?" asked the judge.

"What I want to know is how you could ever talk Thyssen into paying (the money) on a totally meaningless document."

Two former Mulroney cabinet ministers, Perrin Beatty Senator Lowell Murray, have expressed similar amazement at the fees that were triggered by the 1988 understanding.

But Schreiber said he and Thyssen believed the prime minister had thrown his weight behind the deal and its ultimate success was assured.

"I had his word the project was going to happen, why would I care what the bureaucrats did," he told Oliphant.

Evidence has shown Schreiber later issued cheques for $610,000 to a group of Canadian lobbyists, most of them connected to Government Consultants International, a firm headed by former Newfoundland premier Frank Moores.

There were payments of $250,000 to GCI and $90,000 to Moores personally. Cheques for $90,000 also went to Gary Ouellet, Gerry Doucet and his brother Fred, a former aide to Mulroney.

Schreiber also pointed Thursday to a $503,000 cash withdrawal from one of his bank accounts, saying that money was destined as well for "the shareholders of GCI."

He said that, at the request of Moores, he delivered the money to Ouellet but had "no idea" why they wanted the payment handled that way. Moores and Ouellet are now dead and Schreiber didn't elaborate further on the transaction.

Although Bear Head never went ahead while Mulroney was in power, Schreiber says he later paid the former prime minister $300,000 in cash to lobby for it after he left office.

Mulroney, who is to testify next week, has put the payments at $225,000 and says he broke no laws or ethical guidelines.

Schreiber, who has fought for years to avoid extradition to Germany, where he faces changes of fraud, bribery and tax evasion, expressed concern Thursday that the government of Prime Minister Stephen Harper may soon renew its effort to remove him from Canada.

He told reporters he's had no formal notice from federal officials but fears nevertheless "they may try" to take action.

Justice Munster Rob Nicholson ruled last year that Schreiber could stay in the country to participate in the inquiry, but it wasn't clear if that meant all the way to the end of proceedings.

Paul Vickery, the lawyer representing the government at the hearings, wouldn't comment Thursday. There was no word either from Nicholson's office.

Schreiber's lawyer, Richard Auger, gave notice that he may ask Oliphant to issue an order ensuring his client will remain available for future hearings.

There will be further legal argument at a later date. In the meantime, Schreiber remains under subpoena from the commission and won't be going anywhere. Inquiry counsel Richard Wolson wants him to return for at least one more day of testimony, his sixth since the hearings began.