Revealing top secret MI5 files about the July 7 bombers to the families of those killed in the attacks would be "impossible", it was claimed today.
Investigating whether the security service could have prevented the atrocities would involve "handing over the keys" to MI5's Thames House headquarters in London, a hearing to decide the format of the inquests for the 2005 bombings was told.
Neil Garnham QC, counsel for the Home Secretary and MI5, argued that examining MI5's involvement was outside the scope of the inquests.
He said there would be no problem with providing highly sensitive intelligence material to the coroner and counsel to the inquests.
But any jurors could only see the material if they all underwent intrusive "developed vetting" and neither the bereaved families nor their lawyers would be allowed to see it, he said.
"It would be the security service's position that disclosure of sensitive information to a jury is simply not possible," he said.
"For the same reasons as for juries, disclosure to the families would be impossible."
Mr Garnham said the two official reports about the July 7 attacks by the Intelligence and Security Committee (ISC) - made up of security-cleared MPs - had adequately investigated MI5's involvement.
He admitted that the ISC was not "institutionally independent" because it was appointed by and reported to the Prime Minister.
But he insisted it was operationally independent from both the Home Office and the security agencies.
He said: "The stark reality is that no more information could be revealed of that which was shown to the ISC without seriously compromising national security, and in particular the security service's ability to counter the threats of further terrorist outrages."
Mr Garnham said there was "overwhelming" public interest in not having top secret MI5 documents revealed in the hearings.
It emerged after the attacks that security agencies came across two of the July 7 suicide bombers in 2004 while investigating other terrorist plots.
But they were not considered to be of sufficient interest to be put under surveillance.
The coroner, Lady Justice Hallett, asked whether it would be possible to restrict the intelligence material discussed in the inquests to that related to the July 7 attacks.
She said: "The families want to know why the decisions were taken in the way they were, and to put questions."
But Mr Garnham suggested a problem would arise because it was necessary to put the decision not to place the July 7 bombers under surveillance in context of all the other investigations MI5 was carrying out at the time.
He said: "It is difficult to see how that can be done without, metaphorically speaking, handing over the keys to Thames House."
The coroner revealed today that she went on the internet to read conspiracy theories about the July 7 2005 attacks on London.