The Government's controversial plans for secret court hearings are on the verge of becoming law after peers rejected further safeguards to the legislation.
Despite support from Labour and some Tory and Liberal Democrat peers, the House of Lords voted against a move to place extra restrictions on the use of closed material procedures (CMPs).
Under CMPs, evidence that usually would not be brought forward for fear of endangering national security could be heard in secret in civil cases without the claimant being able to see it.
Minister Without Portfolio Ken Clarke argues the change in the law is needed to prevent the UK becoming a "global magnet" for people seeking taxpayer-funded settlements because they know sensitive security-based evidence can not be used against them in court.
Peers voted by 174 to 158, Government majority 16, against a Labour amendment to the Justice and Security Bill to allow CMPs only if a judge ruled a fair verdict was not possible "by any other means".
A plan put forward by former director of public prosecutions Lord Macdonald of River Glaven that would have forced a judge to balance the interests of "national security" and "fair and open administration of justice" was withdrawn without a vote.
Lord Macdonald, a Lib Dem peer, said: "It is matter of regret to me that my own party in the face of the striking illiberality at the heart of this legislation associated itself with the removal in the Commons of safeguards previously added to the Bill in this House.
"I believe this was a grave mistake and this Bill as a result presents renewed risks."
But for the Government advocate general Lord Wallace of Tankerness told peers there were sufficient safeguards in place.
"It is second-best justice but at least it is justice," he said.