The Government has agreed to pay more than £2 million to the family of a Libyan dissident after accepting its role in his illegal rendition, his legal team said.
Sami al Saadi, a leading Gaddafi opponent, was imprisoned and tortured after he was forced to board a plane back to Tripoli along with his wife and four children in 2004 in a joint UK-US-Libyan operation.
Ministers are now understood to have offered him a sum of £2.2 million, but the Government has not admitted liability, Mr al Saadi said.
"My family suffered enough when they were kidnapped and flown to Gaddafi's Libya," he added. "They will now have the chance to complete their education in the new, free Libya. I will be able to afford the medical care I need because of the injuries I suffered in prison. I started this process believing that a British trial would get to the truth in my case. But today, with the Government trying to push through secret courts, I feel that to proceed is not best for my family.
"I went through a secret trial once before, in Gaddafi's Libya. In many ways, it was as bad as the torture. It is not an experience I care to repeat. Even now, the British Government has never given an answer to the simple question: 'Were you involved in the kidnap of me, my wife and my children?' I think the payment speaks for itself. We will be donating a portion of the proceeds to support other Libyan torture victims."
Mr al Saadi was living outside Libya to avoid Gaddafi's agents before he and his family were put on a plane in Hong Kong and flown to Libya, where they were imprisoned. Mr al Saadi was held and tortured for a number of years. Evidence of the UK's hand in the operation - the only known occasion in the War on Terror when so-called extraordinary rendition was carried out on an entire family with young children - emerged after the fall of Gaddafi's regime, lawyers Leigh Day & Co said.
CIA correspondence with Libyan intelligence, which was found in an office belonging to Moussa Koussa, the head of Gaddafi's intelligence agency, apparently stated: "We are... aware that your service had been co-operating with the British to effect (Sami al Saadi's) removal to Tripoli... The Hong Kong government may be able to co-ordinate with you to render (Sami al Saadi) and his family into your custody."
The operation in 2004 followed former prime minister Tony Blair's so-called "deal in the desert" with Gaddafi which saw companies such as BP secure lucrative oil deals and paved the way for the hugely controversial release back to Libya of the only man convicted of the Lockerbie bombing, Abdelbaset Ali Mohmed al Megrahi.
Responding to the announcement of the settlement, Jack Straw said in a statement: "At all times I was scrupulous in seeking to carry out my duties in accordance with the law and I hope to be able to say much more about all this at an appropriate stage in the future."
Amnesty International renewed its demand for an inquiry into the "murky affair". A spokesman said: "The Sami al Saadi case is just one reason why we need a human rights-compliant inquiry into the extent of the UK's involvement in torture and other abuses of detainees held overseas. We'll be watching developments in the case of Mr al Saadi and others with interest, but we'll also be pressing the Government to instigate a proper inquiry as soon as possible, given ongoing criminal investigations."