Binyam Mohamed and other former prisoners are seeking to sue the Government for complicity in torture, and the Government and security services wanted to use secret information in their defence at the High Court.
But Lord Neuberger, the Master of the Rolls who headed a panel of three appeal judges, declared today that it was not open to the courts to order a closed material procedure in an ordinary civil claim.
He said: "The primary reason for our conclusion is that, by acceding to the defendants' argument, the court, while purportedly developing the common law, would in fact be undermining one of its most fundamental principles."
The former detainees - Binyam Mohamed, Bisher Al Rawi, Jamil El Banna, Richard Belmar, Omar Deghayes and Martin Mubanga - deny any involvement in terrorism and allege that MI5 and MI6 aided and abetted their unlawful imprisonment and extraordinary rendition to various locations around the world, including Guantanamo, where they say they suffered torture and inhuman and degrading treatment.
The intelligence services, Attorney General Baroness Scotland, the Foreign Office and the Home Office contest the claims.
The Government asked for the trial to be heard under the closed procedure whereby the claimants would not see large parts of the evidence being used as a defence.
Mr Justice Silber ruled in the High Court in November last year that there was no reason in law why the court could not allow a "closed material procedure" to be used in a claim for damages.
This would mean that the Government and security services would not have to disclose information to the claimants' lawyers if they felt that doing so would damage the interests of national security, the UK's international relations, the detection and prevention of crime, or was likely to harm the public interest in some other way.
Instead, the material would be disclosed to "special advocates" - barristers who had been given security vetting and clearance.
These lawyers would be able to take instructions from the claimants - but before they actually saw any of the material the Government did not wish to disclose.
The former detainees took their case to the Court of Appeal where it was ruled in February that paragraphs which gave details of Binyam Mohamed's torture in US custody should be published.
The Government had argued that publishing the paragraphs, which summarised information received by the British security services from American intelligence, could damage the intelligence-sharing relationship between Britain and the United States.
Today the court again ruled against the Government in a case in which human rights groups Justice and Liberty and a number of media organisations intervened, arguing that the Government's secrecy proposals breach the right to a fair and open trial, and are contrary to the right to freedom of expression and the public's right to know what the authorities are or have been doing on its behalf.
Lord Neuberger said it is possible there may be a civil case where the closed material procedure would be appropriate.
"However, this is one of those cases where it is right for the court to take a clear stand, at least in relation to ordinary civil proceedings."
He added: "The importance of civil trials being fair, the procedures of the court being simple, and the rules of court being clear are all of cardinal importance. It would, in our view, be wrong for judges to introduce into ordinary civil trials a procedure which cuts across absolutely fundamental principles."
He said a person's right to know the case against him and to know the reasons why he has lost or won is fundamental to a fair trial.
Corinna Ferguson, legal officer at Liberty, said: "Yet again, the Court of Appeal has sent the strongest signal to the security establishment that it cannot play fast and loose with the rule of law. Fair and open justice belongs to people, not governments. Whoever governs us from Friday would be wise to bear this in mind."
Dinah Rose QC, representing five of the six men, argued at a Court of Appeal hearing in March that the closed material procedure with specially vetted barristers was never designed for such civil actions.
She told the judges that using the procedure in damages cases is a "fundamental change" which could be made only by Parliament.
She added: "One of the great dangers of the special advocate system is that in some circumstances it serves as a fig leaf for fundamental unfairness, because the hearing looks and sounds like a normal trial but it is not a trial at all - it is something completely different."
The appeal judges gave the Government 28 days to apply for permission to take the case to the Supreme Court.
Sapna Malik, of solicitors Leigh Day & Co, who acted for Binyam Mohamed, said: "We are delighted that the Court of Appeal has fully accepted the claimants' arguments that the Government has been seeking to introduce, via the backdoor, unconstitutional and manifestly unfair measures to defend these most serious of allegations, which the courts must emphatically resist."
Clive Stafford Smith, director of Reprieve, which acted for Binyam Mohamed in the United States, said: "Perhaps the most dangerous legacy of the 'war on terror' is a creeping secrecy that threatens to shutter the workings of British justice away with access limited to a privileged few.
"We applaud the Court of Appeal's excellent decision to keep our courts open, so that the British public may continue to see justice done in their name.
"It is crucial that our Government accept this ruling, and stop hiding the mistakes of the 'war on terror' years. We cannot learn from history unless we know what it is."
Source: The Independent