Two Iraqis who claim to have been victims of the filmed abuse by British soldiers said last night that they would sue the British Government.
The threat of legal action came as 1,000 demonstrators in Basra burnt the British flag, and the city's governing council declared that it was cutting ties with British authorities.
The Royal Military Police confirmed that two more soldiers from the 1st Battalion The Light Infantry have been arrested in connection with the assaults in Maysan province, southern Iraq, in January 2004.
The arrests last night followed the arrest on Monday of Cpl Martin Webster who is alleged to have filmed the beatings. However, the continuing British investigation did little to assuage the growing backlash in Iraq.
The Iraqi protesters marched on the British consulate in Basra with banners saying "No to Tony Blair" and "Put British soldiers on trial" before burning British flags.
Major-General Hassan Suwadi, the Basra police chief, said his men would no longer carry out patrols with British troops: "We condemn the abuse carried out by the British, we will no longer work with them."
Two men, Bassem Shaker and Tariq Abdul-Razzak, claimed they were among those who were arrested and beaten by British soldiers when the video was made. Speaking at a press conference at the offices of the Shia militia leader Muqtada al-Sadr, Mr Shaker, 27, said: "I was one of 250 unemployed people demonstrating in the streets in 2004. When we reached the governor's mansion we were surprised by the presence of British forces.
"We started throwing stones at them because we believed that they were behind all our misery ... A group of British soldiers rushed out from their base and arrested nine of us ... They were beating us with fists and batons, and kicking us. Then they cuffed our hands and dragged us to their base ... where they beat us and frightened us with dogs before releasing us before sunset."
Mr Shaker said he had not reported the alleged abuse because he did not trust the British authorities to provide justice. "But when we saw this tape and the amount of anger it caused inside and outside Iraq, we decided to come today to the al-Sadr office because we need them, after God, to help us to sue the British forces and compensate us," he said. "Those troops humiliated us and violated our rights."
The rising tension comes at an already fraught time in southern Iraq, with clashes between British troops and Shia militias who had infiltrated the Iraqi police.
In London it was unclear last night whether Cpl Webster had been freed after his arrest on Sunday. His father, Jim Webster, said "We have spoken to Martin, during a phone call. He has been released, but whether he will have been rearrested we can't say." The Ministry of Defence refused to comment on whether Cpl Webster was still in custody.
Mr Webster, 57, a builder from Falmouth in Cornwall, said that in his view British troops should not be in Iraq. He said the politicians who sent them did not understand the pressures they were under. "People don't understand what is going on out there in Basra. Martin is in the firing line, It's easy for the politicians to throw mud, but my son's out there on the ground. The politicians don't have a clue what is going on there. I don't think the troops should be out there. And of course I'd like to see my son come home," he said.