Inquiry launched into 'betrayal' of Libyan asylum-seekers by MI5

Britain's relationship with Gaddafi regime in spotlight again amid claims of intimidation

Tony Blair with Colonel Gaddafi in 2007; in the build-up to the meeting, it is alleged, MI5 and MI6 collaborated with Libyan intelligence services (PA)

Evidence that British intelligence services colluded with Libyan spies by passing over details of refugees who fled the North African country is to be investigated by Parliament.

Allegations that MI5 housed two Libyan agents in a central London safe house, providing them with details of asylum claimants who could be coerced into working for Gaddafi's regime, will be examined by MPs on the Intelligence and Security Committee, the Home Office said yesterday.

The Mail on Sunday reported yesterday that in 2006 some vulnerable targets may have been threatened with deportation back to Libya if they refused to help, leading to possible torture or execution. This would have broken the Geneva Convention and the Human Rights Act, the paper said.

The revelations originated from secret documents sent from London to Tripoli that were unearthed in the Libyan capital after the fall of Muammar Gaddafi last year. They provide further details about the level of undercover co-operation between Britain and Gaddafi's regime.

"We do not know the full details of this case, but we take such claims seriously," said a spokeswoman from the Home Office. She added that MPs already looking into allegations that the UK collaborated with rendition flights to Libya "will take account of any allegations raised by this report".

Lord Goldsmith, who served as Attorney General under Tony Blair while the UK negotiated with Gaddafi, said that if "political refugees were in some ways being coerced to co-operate under threat of something possibly happening to their families back home," it would constitute a "real issue" that would "need to be investigated"."I didn't know anything about this particular case and I'm very troubled by these allegations," he told Sky News. He also said that the world thought Gaddafi had "turned for the good" but that "turned out to be a wrong judgement".

One of the documents shows a British official suggesting that one target "could become a very good source and we can pressure him to work for us because he's not a British citizen".

Separate reports on the confidential Libyan papers show that MI6 set up a mosque in a major European city – without telling its EU allies – with the intention of luring Islamic extremists into unwittingly providing "information on terrorist planning".

A double agent with close links to al-Qa'ida operations in Iraq, codenamed "Joseph", was recruited in late 2003 without authorisation from the security services of the unnamed country in which he lived.

A secret message from MI6 to the headquarters of Moussa Koussa – the Libyan intelligence chief – published by The Sunday Telegraph, underlined the sensitivity of the mission. "We told 'Joseph' that under no circumstances was he to tell the [national intelligence service of the country he was going to operate in] of his involvement with us and the Libyans," it said.