It had primed the SAS "killing machine" with flawed information and set them after the trio, who died in a hail of 27 bullets on the Rock seven years ago, lawyers for the terrorists' families told the Strasbourg court.
The final legal battle over the "Death on the Rock" shootings could have immense implications for Britain's security and anti-terrorist policies, if the European Court of Human Rights rejects the Government's claim the three were killed lawfully.
The three IRA members, Daniel McCann, Sean Savage and Mairead Farrell, had been plotting to detonate a bomb at the changing of the guard ceremony by the Royal Anglian Regiment. Two days before the ceremony and after being tailed by the security services they were gunned down as they headed for the Spanish border.
The Government's case was that the security forces believed the trio planned to detonate an already planted bomb by remote control, that they were armed and made suspicious movements when challenged.
It later emerged there was no bomb on Gibraltar, no remote control device and no guns - although explosives were later discovered across the border.
Witnesses said they heard no warning before the soldiers opened fire and two described how McCann and Farrell put up their hands as if in surrender. Lawyers for their families have maintained the three were victims of a high-level plot to kill. Yesterday one of them, Douwe Korff, said: "Those who trained and briefed the SAS primed a machine to do what they did, to kill ... the British Government pulled the trigger."
Stephen Richards, for the Government, said the soldiers were acting on reasonable assumptions. "If they had succeeded the consequences would have been a devastating loss of life," he said. "There was no alternative to the soldiers but to shoot the terrorists."
The European Commission of Human Rights has already ruled by 11 to six that there was no violation of Article 2. It will be several months before the full 19-judge court delivers is ruling.Reuse content