Undercover American agents are staging secret 'sting' operations in Britain against criminal and terrorist suspects they want to extradite to the US.
• Comment: Beware: George Bush's secret agents can now arrrest us in our own country
In a recent operation, agents from America's Department of Homeland Security set up a suspect by posing as dealers wanting to illegally sell night-vision goggles for export to Iran.
The spies arranged a series of clandestine meetings in London hotels, which they secretly filmed as evidence. It is thought to be the first time American agents have been caught using such sting tactics in Britain.
Urgent questions were being asked about whether the British Government had been aware of the operation. If so, it raises issues of the State collaborating with foreign agencies to entrap suspects - and if not it raises the spectre of American spies working unchecked on British soil.
Human rights campaigners demanded an explanation from Home Secretary John Reid and Foreign Secretary Margaret Beckett.
The case has provoked a huge row because the agents used tactics banned in Britain. In addition, the offence of which he is accused would not be a crime in this country. If British police officers had employed this type of sting, the ensuing case would almost certainly be thrown out of court.
In July 2003, ten defendants accused of laundering £15million walked free from Southwark Crown Court after Judge George Bathurst-Norman described police actions as 'massively illegal'. The judge said a police sting aimed at trapping them had 'overstepped the line between legitimate crime detection and unacceptable crime creation'.
Following the US spy sting an Iranian-born businessman - named by Whitehall officials last night as former Iranian ambassador to Jordan Nosratollah Tajik - now faces extradition to America.
Mr Tajik, who has lived with his family in Britain for several years, is accused of conspiring to sell military equipment to Islamic extremists. He was arrested on the Americans' behalf by British police officers before the alleged deal went ahead and detained in prison for a week.
The sting operation also raises new questions about Britain's one-sided extradition arrangements with the United States, under which British citizens can be sent across the Atlantic for trial with ease.
It is much harder for British authorities to extradite American citizens to the UK.
During the operation, the undercover American agents, who were unarmed, claimed they wanted to sell night-vision goggles, said to be worth £50,000, for export to Iran, in breach of US export controls.
Mr Tajik, who is 52 and was recently in hospital with a serious illness, has since been released on substantial bail and has reported daily to a police station near his Durham home. He is an honorary fellow of Durham University's Institute for Middle Eastern and Islamic Studies and has an engineering degree from the University of Westminster.
Mr Tajik is now due to appear at an extradition hearing at City of Westminster magistrates court on December 4.
The Mail on Sunday understands Mr Tajik's legal team will claim he has no terrorist connections or criminal record and that the American agents acted illegally as 'agents provocateurs' by trapping him.
Sources close to Mr Tajik say he feels he is being made a scapegoat for America's opposition to Iran, and the case could widen the rift between America and Iran because of Mr Tajik's former diplomatic role.
According to a witness at a House of Representatives inquiry into state-sponsored terrorism in Iran in February last year, Mr Tajik was one of several Iranian diplomats recruiting Palestinians to establish terrorist cells.
Matthew Levitt, director of terrorism studies at the Washington Institute for Near East Policy, said: "Iran actively recruits Palestinians for terrorist training in its camps."
He added: "Iran arranged for free travel, medical treatment and terrorist training for Palestinians who had been wounded in the violence in the Middle East who then returned to the Palestinian territories to establish terrorist cells. Among those involved in the recruitment drive were...Iranian ambassador to Jordan Nosratollah Tajik."
Iran, along with Syria, is also the main sponsor of Hezbollah.
It is not known whether the sting operation is connected to a British investigation launched in August after Israel accused Britain of indirectly supplying Hezbollah terrorists with military night-vision equipment that helped them target Israeli soldiers in Lebanon.
The batch of 250 systems, each stamped "Made in Britain', was discovered by Israeli troops in Hezbollah command bunkers in southern Lebanon. Israel demanded to know whether the night-vision gear was part of a batch sold by Britain to Iran in 2003 for use against drug smugglers.
The sting comes just days after it was revealed that Home Office Ministers signed away crucial British extradition rights with America without holding a single meeting with their US counterparts. The Government last month defeated attempts to block further 'fast-track' extraditions despite a rebellion by backbench Labour MPs.
Critics of the 2003 treaty claim that the burden of proof now required makes it too easy for US authorities to demand that British subjects stand trial in America, as demonstrated by the recent case of the NatWest Three.
British bankers Gary Mulgrew, David Bermingham and Giles Derby fought a long-running but unsuccessful battle to avoid extradition on fraud charges related to the collapse of energy giant Enron. They were extradited in July, and were not allowed to return to the UK despite being granted bail. Their trial will be held in Houston, Texas, next year.
Shami Chakrabarti, director of the human rights group Liberty, said last night: "We already have a one-sided extradition arrangement that allows people to be bundled off to America without so much as a by-your-leave. Now we have US agents operating in Britain entrapping people into criminality in the first place.
"The Home Secretary and the Foreign Secretary must tell us the nature of these agents' operations in Britain."
Liberal Democrat Home Affairs spokesman Nick Clegg said last night: "The case of rendition flights to transport American prisoners for interrogation in other countries raised concerns about the degree to which the American security services run operations on British soil without the full knowledge of the British Government.
"Everyone wants the British and American security services to co-operate well, but we don't want a situation in which American authorities can act on British soil with complete impunity and without regard for British domestic law."
The Metropolitan Police refused to comment on the case. A spokesman said: "We do not discuss our investigative techniques, but we do nothing that is illegal and we work to Home Office guidelines."
A Home Office spokeswoman said: "We are aware that this man is wanted by the US Government on charges of alleged arms sales. The matter is before the courts, so we cannot comment."