Two British residents who were freed from Guantanamo Bay in December will remain in the UK after Spain dropped its bid to extradite them on terrorism charges.

Jamil el-Banna and Omar Deghayes, who spent five and six years respectively as detainees at the controversial camp, were detained under European arrest warrants almost immediately after touching down at Luton airport.

But Baltazar Garzon, the Spanish judge leading the attempt to extradite them, ruled that their time in Guantanamo had so severely affected the men's mental health that it would be "inhumane" to continue proceedings against them.

Since December, both men have been on bail with stringent conditions, such as wearing electronic tags and obeying curfews, while extradition proceedings continued.

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What has motivated Spain to act now is a mystery, America has had Mr el-Banna in custody for five years and laid no charges

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The Spanish authorities alleged that Mr Deghayes, a Lybian national who lives in Saltdean, near Brighton, and Mr el-Banna, a Jordanian-Palestinian father of five from Dollis Hill, northwest London, were members of a cell allied to al -Qaeda and had associated with one of the men involved in the 2004 Madrid train bombings.

But Judge Garzon said today that the pair's time in Guantanamo had "caused a serious deterioration in the mental state of the accused and today ... it is impossible, even inhuman, to pursue the European arrest warrants.”

He said he has therefore decided to cancel the European arrest warrants dated December 19, 2007.

Speaking from his home Mr Deghayes said from his home in Brighton: “It’s good – it’s happy news. I always knew they would realise their mistake and give up the case.”

The father-of-one said he hoped curfews imposed on him and Mr el-Banna would now be lifted.

“I still have problems with immigration as the authorities have taken away my resident status, but this is a relief, of course.”

He stressed that one of his main concerns was between 40 and 50 detainees still in Guantanamo who are in “immediate danger” of deportation to their home countries where they may be tortured.

Me Deghayes and Mr el-Banna returned to the UK with a third man, Abdennour Samuer, 34, on December 19 last year.

They were all immediately re-arrested by police. Mr Samuer was allowed to walk free from Paddington Green police station while

Mr el-Banna and Mr Deghayes were released on bail. Vanessa Redgrave, the actress and campaigner, provided thousands of pounds in surety for both men.

Zachary Katznelson, Senior Counsel for Reprieve, the human rights charity which has represented the men, said today: “We are thrilled to hear that Judge Garzon has done the right thing and dropped his request for extradition of Jamil and Omar. These men suffered horrors for years at the hands of the United States. They never had a trial of any type, yet they served more than five years in a brutal prison. It is now time to let them rebuild their lives here in the UK – it’s where their families are and it’s where they call home.”

Mr Katznelson added: “Jamil and Omar were interrogated countless times about the Spanish allegations. The US found there was nothing to them. The UK government fully investigated the men before and upon their return home and found they had violated no laws. It would just have been cruel to put Jamil and Omar through yet more about the same allegations about which they have already been cleared. At long last, the men are fully free.”

Jackie Chase, spokeswoman for the Save Omar Campaign, said: “We are delighted. These two men have suffered so appallingly - two men proved to be innocent of any charge.

“After six-and-a-half years they will now be able to attempt to rebuild their lives.”

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