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Richard Gifford, the solicitor for the islanders, said that they were “in a state of shock” at the verdict, which followed judgments in their favour by the High Court and Court of Appeal.
“There has been overwhelming condemnation of the Government’s actions with judges who have described the treatment of the islanders over 40 years as shameful, repugnant, and abuse of power. Today’s judgments adds disgraceful and maladministration.
“There is such a body of judicial opinion that the Government will feel bound to review the treatment of these people. This has been a very costly victory of the Government. They hoped they could govern overseas territories without judicial interference but on the constitutional principal they have lost hands down.”
“Unfortunately three of the judges today decided they could not look behind the decision of Ministers.”
Mr Gifford said the islanders’ now hoped the European Court of European Rights would rule that they were protected by human rights legislation.
After the ruling, the Foreign Secretary David Miliband said in a statement: "The House of Lords has today allowed the appeal taken on my behalf and has upheld the validity of the British Indian Ocean Territory (Constitution) Order 2004.
"As a consequence of this ruling, the orders of the Court of Appeal in May 2007 and of the Divisional Court in June 2006 in this regard are set aside.
"The two Orders in Council made for the British Indian Ocean Territory (BIOT) in 2004 therefore stand and provide that no person has a right of abode in BIOT or the right to enter the Territory unless authorised."
He said: "It is appropriate on this day that I should repeat the Government's regret at the way the resettlement of the Chagossians was carried out in the 1960s and 1970s and at the hardship that followed for some of them.
"We do not seek to justify those actions and do not seek to excuse the conduct of an earlier generation.
"But the courts have previously ruled that fair compensation has been paid and that the UK has no legal obligation to pay any further compensation; and British citizenship was granted to a large number of Chagossians under the British Overseas Territories Act 2002.
"However, our appeal to the House of Lords was not about what happened in the 1960s and 1970s. It was about decisions taken in the international context of 2004.
"This required us to take into account issues of defence/security of the archipelago and the fact that an independent study had come down heavily against the feasibility of lasting resettlement of the outer islands of BIOT."
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