A North London businessman caught up in an FBI sting was formally cleared at the Old Bailey today of agreeing to supply weapons to a Colombian terror group after the prosecution dropped the case against him.

Judge Stephen Kramer said he had ordered the prosecution to disclose certain material to the defence, but they had been unable to agree to the demand because the FBI refused to release the document.

As a result Julian Bevan QC, prosecuting, offered no further evidence against Syed Bukhari. The jury formally returned a not guilty verdict and Mr Bukhari was freed.

It had been alleged that Mr Bukhari was caught in a FBI sting. An FBI agent, David Sullivan, posed as an illegal arms trader and claimed he was acting for the terror group FARC in their conflict with the Colombian government. He gave evidence during the four-week trial.

But as the prosecution continued, it is understood that the defence asked for an FBI document to be disclosed, which the American agency was unwilling to do.

The prosecution had claimed that the arms to be supplied to Mr Sullivan included 200 surface-to-air missiles which were shoulder-launched and capable of destroying an aircraft in flight.

Mr Bevan told the jury: "It was part of the arrangement Bukhari would also supply rocket-propelled grenades sufficient to equip a battalion of 900 to 1,000 men together with 900 AK47 rifles. The cost of the surface-to-air missiles would have exceeded $38 million.

"In the course of discussions with Bukhari, Mr Sullivan made it absolutely clear this would not be a legitimate transaction. There were repeated references to smuggling false documents, mis-description of goods, bribery and corruption."

Mr Bukhari, 46, from Hendon, North London, had denied entering an arrangement where he proposed making weapons available for terrorism. He had been prosecuted under the Terrorism Act but the case collapsed after days of legal arguments involving public interest immunity in the absence of the jury.

Outside court his solicitor, Richard Hallam, said his client was "delighted that his lack of involvement in any offence has now been made clear".

"At an early stage in this trial prosecuting counsel made clear to the court that it was not the Crown’s case that the defendant was a terrorist sympathiser or involved in terrorism or a supplier of weapons to terrorists," Mr Hallam said.

"Mr Bukhari has always denied committing any offence in relation to the matters which were subject of investigation."

Legal experts believe that the case highlights problems where a foreign law agency is involved in an operation inside the United Kingdom.

After the case the Crown Prosecution Service said the prosecution made a Public Interest Immunity (PII) application yesterday not to disclose to the defence sensitive information in the case against Mr Bukhari. A PII application is made in closed court.

A spokesman said: "Having heard the application, his Honour Judge Kramer ordered disclosure. Following careful consideration by senior lawyers, prosecution counsel Julian Bevan QC today told the court and jury that as he was unable to fulfil his disclosure obligations in respect of this information, the CPS was no longer able to proceed and was offering no further evidence against Mr Bukhari."

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