Six Blackwater Worldwide security guards have been notified that they could face prosecution in America for shooting dead 17 civilians in Baghdad’s Nisoor Square in an infamous incident that provoked fury in Iraq.

The Blackwater employees have reportedly been sent “target letters” by US prosecutors telling them that they could face charges for opening fire at the crowded intersection on September 16 last year.

The move was welcomed by human rights activists, who have long complained about US private security in Iraq.

“It’s incredibly important that these incidents are not beyond the law. It certainly would be a step in the right direction if the US would go ahead and bring charges,” said Jennifer Daskal, of Human Rights Watch, who has interviewed the traffic policeman on duty in Nisoor Square at the time of the shooting. “This is definitely the most high-profile case of contractor abuse in Iraq, but it’s certainly not the only one.”

The shootings sparked a crisis in relations between the US and the Iraqi Government, which threatened to expel Blackwater. In negotiations on a new bilateral security agreement, the Iraqis have pressed for all foreign personnel to be subject to Iraqi law.

Washington has agreed to place contractors under Iraqi jurisdiction, but is still refusing to allow Iraq to put US troops or officials on trial. Blackwater, based in North Carolina, has announced that it is moving out of private security and will concentrate on training, aviation and logistics.

The Blackwater guards, all former US servicemen on contract to protect US State Department personnel, opened fire after their motorcade entered Nisoor Square. US officials initially said that the motorcade was travelling to the heavily guarded Green Zone when a car bomb exploded, followed by volleys of small-arms fire that disabled one of the vehicles.

In remarks prepared for a congressional hearing but never delivered because of the investigation, Erik Prince, the chairman of Blackwater, claimed that the guards had “returned fire at threatening targets”, including “men with AK47s firing on the convoy” and “approaching vehicles that appeared to be suicide car bombers”.

Witnesses said that the four-car convoy, protected by two helicopters, did a U-turn and started going the wrong way round the square before stopping in the middle and opening fire without provocation.

Earlier reports suggested that the FBI was focusing on three Blackwater guards. The Washington Post reported that six had been sent “target letters” - a prelude to possible prosecution.

The US employs 190,000 contractors in Iraq, including 25,000 to 30,000 private security guards. Although heavily armed, the private security contractors enjoy immunity from Iraqi law under a decree issued by Paul Bremer the day before he stepped down as head of the Coalition Provisional Authority in June 2004.

Contractors hired by the US Defence Department can be prosecuted in US courts for crimes committed overseas under the Military Extraterritorial Jurisdiction Act of 2000. That law was expanded in 2004 to include contractors working “in support” of the Pentagon.

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