The CPS said that after a review of the police file there was insufficient evidence to continue the case against Donald Fearon, 38, of no fixed abode, who was arrested after the ex-minister's car was found in Brixton, south London.
Mr Davies last night accepted the CPS decision to drop the case as an "exercise of legal judgment". But he insisted: "I stand by the formal statements which I have made to the police." He added: "I committed no crime and did nothing improper. My lapse of judgement was to allow myself to be placed in a position of grave personal danger and become the innocent victim of an horrific crime perpetrated by a cunning and plausible individual ..."
But the lack of evidence for a conviction is certain to raise questions about the account given to police by the former minister, who admitted the circumstances were "bizarre".
It could wreck any remaining hopes Mr Davies may have of pursuing a high- profile career in the Welsh Assembly. His successor at the Welsh Office, Alun Michael, has spoken about having Mr Davies in his team if he wins the Labour nomination to become first secretary in the assembly.
Mr Davies was clearly keen to quash suggestions that he had been a difficult witness whose story police had doubted. He insisted he had co- operated fully with the inquiry.
He originally claimed he was the victim of a car-jacking, but later told police he had taken a stranger he had met on Clapham Common for a drive in his car to Brixton. After picking up two more strangers, a man and a women, he had his car, mobile phone and wallet stolen at knifepoint.
One of the men was later reported to have tried to blackmail Mr Davies the day after the robbery. It was then that he decided to resign. Mr Davies has continued to deny there was any sexual motivation for the encounter on the common.
Yesterday, Mr Fearon's solicitor, Philip Cremin, confirmed that charges against his client had been "discontinued", but he was unwilling to comment on the case.
Mr Davies's lawyer, Martin Warren, said the decision had "taken everybody by surprise, including Mr Davies". Mr Warren added: "He [Mr Davies] has got to reflect on his position over the weekend. But as far as the police are concerned, this matter is at an end.
"Whether Mr Davies decides to take further, private action will be a matter for him."
Five other people, including one woman, have been bailed by police but none is expected to be charged.Reuse content