Today's decision blows a hole in the Home Office's strategy of trying to deport terror suspects out of Britain and back to their countries of origin.

Although it is vital to stress that this ruling only applies to people being sent back to Libya, it is extremely significant because Libyans account for eight out of the 23 potentially dangerous foreign terror suspects - a third - that the Home Office is trying to deport.

The department has already announced that it will appeal against today's decision, but in the meantime - in the case of the Libyan suspects - it is placed in a difficult position in a practical sense.

On a temporary basis, it can continue to hold them under immigration powers in conditions which closely resemble control orders. This will see them confined to their homes for 12 hours per day, denied mobile phones and access to the internet, and given several specific travel restrictions.

However, if the Home Office loses an appeal against today's decision, it will have to think again because it cannot legally carry on holding people under immigration powers - which are designed to act as a precursor for deportation - if there is no realistic chance of deportation actually happening.

The chances are that if the appeal is lost, the Home Office will have to issue the suspects with control orders and hold them that way.

Of course, the Government would much prefer to deport them, but today's ruling means that there is no real prospect of any Libyan ever being sent back to Libya.

What this saga clearly shows, then, is the weakness of the Government's 'memorandums of understanding' which it signed with Middle Eastern and North African countries with the intention of deporting terror suspects.

Many such countries have very poor human rights records, and the meagre guarantee that the Government gets from these memorandums - basically, the word of the leader in question that no abuses will be committed - was clearly not considered convincing enough by the court today. Libya, in particular, is proven to have an appalling human rights record.

The Home Office says that a key part of a memorandum is to set up a monitoring group to make sure that a leader keeps his word, but in this regard the Government has had difficulty in getting any serious groups to operate as monitors.

Of course, decisions like those made by the Special Immigration Appeals Commission (Siac) today also have a further diplomatic impact - that of offending the country with whom an agreement has been signed. Colonel Gaddafi, for example, will feel that Britain's judges do not trust his word.

Currently, three such memorandums exist - with Jordan, Lebanon and Libya. The Jordanian agreement was given a major boost by the court victory enabling Abu Qatada to be sent back, although he is appealing. The Lebanese agreement has never been tested. And the Libyan agreement has been fatally undermined by today's developments.

Britain has embarked upon a different strategy for dealing with Algeria. It is seeking assurances in each individual case rather than a blanket memoranda of understanding. Siac has recently upheld one deportation, but the suspect is appealing.