The Government will make payments to former detainees held at Guantanamo Bay to settle High Court actions and help pave the way for an inquiry into allegations of British complicity in torture, the Justice Secretary said today.
Kenneth Clarke said the details of the agreement, negotiated over the last few weeks, will remain confidential.
The Secret Intelligence Service, known as MI6, and the Security Service, MI5, said the settlement will allow both agencies "to concentrate on protecting national security".
Mr Clarke told MPs: "I can today inform the House that the Government has agreed a mediated settlement of the civil damages claims brought by detainees held at Guantanamo Bay.
"The details of that settlement have been made subject to a legally-binding confidentiality agreement.
"No admissions of culpability have been made in settling these cases."
The settlement of the claims will pave the way for an independent judge-led inquiry into allegations of British complicity in the torture of detainees held by other countries in the wake of the September 11 terror attacks.
It is hoped former Appeal Court judge Sir Peter Gibson will start the inquiry's work by the end of this year and report within 12 months.
Mr Clarke said: "To help pave the way for the inquiry to begin, the Government committed to entering into a process of mediation with those held by the United States in detention in Guantanamo Bay who had brought civil actions against the Government."
He went on: "The alternative to any payments made would have been protracted and extremely expensive litigation in an uncertain legal environment in which the Government could not be certain that it would be able to defend departments and the security and intelligence agencies without compromising national security.
"This cost was estimated at approximately £30 - £50 million over three-to-five years. And in our view there could have been no inquiry until that litigation had been resolved."
Mr Clarke added: "We've paid up the money so we can move on."
In his statement to MPs, he went on: "Confidentiality is a very common feature of mediation processes, as in this case.
"This mediated settlement represents a significant step forward in delivering the Government's plan for a resolution of these issues in the interests of both justice and national security.
"Today's announcement is a very important step forward in getting the Gibson Inquiry under way."
News of the payments was first reported by ITV News At Ten last night.
Among those said to be receiving settlements are Binyam Mohamed, Bishar Al Rawi, Jamil El Banna, Richard Belmar, Omar Deghayes, Moazzam Begg and Martin Mubanga.
Not all are British nationals, with some said to be asylum seekers.
Their allegations include claims that the Government knew they were being illegally transferred to Guantanamo Bay but failed to prevent it.
There are also allegations that British security and intelligence officials colluded in their torture and abuse while they were held abroad.
Allegations include that UK agents witnessed mistreatment, including the use of hoods and shackles.
Former detainee Binyam Mohamed was granted refugee status in Britain in 1994 after seeking asylum from Ethiopia.
He travelled to Pakistan in 2001 - the year he converted to Islam - and was arrested there a year later on suspicion of involvement in terrorism, before being "rendered" to Morocco and Afghanistan.
After being subjected to alleged torture by his US captors, he was sent to Guantanamo Bay in 2004. However, in October 2008, the US government dropped all charges against him.
Mohamed was released and returned to Britain in February 2009.
British-born Moazzam Begg was also arrested on alleged terror offences in Pakistan in 2002 and spent two years at Guantanamo Bay before being released without charge.
In a rare public speech last month, Sir John Sawers, the head of MI6, warned that demands by the courts for the disclosure of secret material was hindering the work of the security services.
Speaking in July, Mr Cameron told the House of Commons the Gibson inquiry was necessary "to restore Britain's moral leadership in the world".
The inquiry will have access to "all relevant Government papers, including those held by the intelligence services", and will get full co-operation from official departments and agencies.
But much of the evidence taken by the inquiry panel will be heard behind closed doors and will not be made public in order to protect secret information.
The Prime Minister also published new guidance for intelligence and military personnel on how to deal with detainees held by other countries,
Earlier, No 10 insisted that the payments being made to the former detainees under the terms of the settlement were not compensation.
"We are not admitting culpability," the Prime Minister's official spokesman said.
The spokesman acknowledged that some people would find the payouts "unpalatable" but said that it been necessary to draw a line under the matter.
"Clearly some people will find that unpalatable. However we were spending public money on this issue by virtue of the court cases and the legal action that had been brought against us," the spokesman said.
"In the last few years nearly 100 employees of the security services have been devoted to dealing with these cases. We were in a situation where we were facing years of litigation, the cost of which would have been tens of millions of pounds.
"We had to draw a line under the past and let them get on with the job that they have to do."
Jackie Chase, a long-term campaigner for Deghayes' release and member of Brighton Against Guantanamo, said the payments should not be used "to avoid the punishment and dismissal of the intelligence staff and government officials who allowed these crimes against humanity to occur".
She said: "The criminals in this country are those in MI6 who broke the rules of what foreign countries can know about any of us.
"They threaten the freedom of all of us and threaten the reputation of our country in human rights and justice."
Deghayes settled in Saltdean, near Brighton, East Sussex, as a refugee after he and his family left Libya in 1986 following the assassination of his father, a democrat and trade unionist.
In 2001, after studying law at British universities, he travelled with a friend to Malaysia, Pakistan and eventually to Afghanistan where he met his Afghani wife and had a son.
He was arrested in Pakistan after leaving Afghanistan because of the US-led bombing after September 11.
He was released from Guantanamo Bay in 2007 after years of being held there on suspicion of terror-related offences without charge or trial.
Claims have been settled with 16 former detainees, Mr Clarke told MPs.
These include 12 cases that were before the courts and a further four who would have come before the courts, he said.
He added that police inquiries were still ongoing and could delay the start of the Gibson inquiry.
Shadow justice secretary Sadiq Khan asked for details of the cost of the payments, claiming there was a "public interest in knowing the total sums involved in this settlement".
But Mr Clarke told him the settlement "could be reopened if either side started breaking the confidentiality" but said there was a "gain" from mediating the claims instead of mounting a lengthy court battle.
Shami Chakrabarti, director of human rights group Liberty, said: "This settlement could bring a broader inquiry and the end of the torture scandal a little bit closer.
"But if the slow, morale-sapping bleed of revelation and litigation is to end, the Gibson process must have all the power and authority of a court.
"It must distinguish between national security and embarrassment; between clean up and cover up."