MI6 agents in Afghanistan were told they were not obliged to intervene if they witnessed suspected terrorists being harmed by their American captors, an official inquiry into allegations Britain was complicit in torture has disclosed.
It also concluded that UK operatives "may have become inappropriately" involved in some cases of rendition of captives who were believed to be al-Qa'ida fighters.
Sir Peter Gibson's investigation listed 27 areas he believed needed further inquiry, including whether the Government should have done more to obtain the release of UK nationals locked up at the Guantanamo Bay detention camp.
It suggested that the Labour minister Jack Straw should have asked more questions when he was Foreign Secretary about the UK's possible involvement in activities in breach of the Geneva Convention.
Documents released by Sir Peter, a former High Court judge, showed an MI6 officer reported back to headquarters in London what he had seen as American officers interrogated captives at Bagram airbase, near Kabul, in January 2002.
A telegram he received in reply read: "It appears from your description that they may not be being treated in accordance with the appropriate standards. Given that they are not within our custody or control, the law does not require you to intervene to prevent this."
He was reminded that the "Americans understand that we cannot be party to such ill treatment nor can we be seen to condone it".
But the telegram made clear there was no automatic requirement to intervene if UK officers witnessed inhuman treatment of captives. It said: "If circumstances allow, you should consider drawing this to the attention of a suitably senior US official locally."
No official complaint over the episode was passed to the American authorities and seven days later Tony Blair reassured MPs that detainees in the US detention camp of Guantanamo were being treated humanely.
Sir Peter said he wished he has been able to investigate further "whether in some cases, UK officers may have turned a blind eye to the use of specific, inappropriate techniques or threats used by others and used this to their advantage when resuming an interview session with a now compliant detainee".
The inquiry was set up two and a half years ago by David Cameron but was heavily criticised by human rights lawyers who abandoned co-operation.
It was scrapped last year and responsibility for examining alleged complicity transferred to a parliamentary committee. Human rights groups denounced the decision as a "whitewash".
Sir Peter on Thursday published an interim report setting out the reasons he believed his inquiry should be re-established.
In a damaging finding, he said: "A theme that runs through a number of the lead cases considered by the inquiry is whether treatment issues - such as sleep deprivation, hooding and media reports of waterboarding - were raised appropriately with the relevant liaison partner responsible for the detention and treatment in question".
He said the inquiry had received papers suggesting that in "some instances there was a reluctance to raise treatment issues" for fear of harming relations with the United States.
The inquiry also found that while no formal request was put to the UK, records show the Government was aware that US officials were considering the use of Diego Garcia, an island in the British Indian Ocean Territory, for holding or transiting detainees between November 2001 and January 2002."
The report said: "There is an issue as to whether the Government and the Agencies may have become inappropriately involved in some cases of rendition."
Mr Straw told MPs on Thursday: "As Foreign Secretary I acted at all times in a manner which was fully consistent with my legal duties with national and international law. And I was never in any way complicit with the unlawful rendition or detention of individuals by the United States or any other state."