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The Information Tribunal ruled that secret records of Cabinet discussions in March that year must be published and that the public had a right to know what the Cabinet of the then prime minister Tony Blair decided behind closed doors on the issue of the impending war.
Anti-war campaigners have long believed that the minutes could contain crucial information showing that the military action to topple the dictator Saddam Hussein was illegal.
Critics of the war have alleged that Lord Goldsmith, the former attorney general, had been pressured by Mr Blair's allies to say the invasion was legal, a claim he has repeatedly denied.
The tribunal's decision covers Cabinet meetings held on 13 and 17 March, 2003, the last before United States and British forces invaded Iraq.
In its ruling, the tribunal said: "We have decided the public interest in maintaining the confidentiality of the formal minutes of two Cabinet meetings at which ministers decided to commit forces to military action in Iraq did not… outweigh the public interest in disclosure."
The arguments in favour of keeping the formulation of government policy secret and preserving the principle of collective responsibility had been defeated in this "exceptional case", the tribunal said.
The ruling opens up the prospect of one of the most controversial government decisions of recent years being laid bare.
The tribunal said: "The decision to commit the nation's armed forces to the invasion of another country is momentous in its own right, and… its seriousness is increased by the criticisms that have been made of the general decision-making processes in the Cabinet at the time."
But for the first time, the Government has decided to make use of "Section 53" of the Freedom of Information (FOI) Act, allowing it to veto the release of the documents. The clause was added to the Act as a way of placating ministers who wanted final control over the release of sensitive documents.
Using the power, rather than challenging the tribunal's decision at the High Court, makes it almost impossible for campaigners to overturn the veto. They can now only challenge it by seeking a judicial review.
The Government decided to issue the veto during Monday's cabinet meeting in Southampton. The Justice Secretary, Jack Straw, said releasing the minutes risked doing "serious damage" to the frank discussions that take place around the cabinet table.
"There is a balance to be struck between openness and maintaining aspects of our structure of democratic government," he said.
"The convention of cabinet confidentiality and the public interest in its maintenance are especially crucial when the issues at hand are of the greatest importance and sensitivity."
David Howarth, the Liberal Democrats' justice spokesman, said that by using the emergency veto power instead of appealing through the courts, the Government was "silencing opposition" to its decision "by decree".
"We need to learn the lessons, and we need to learn them as quickly as possible. That is why these Cabinet minutes should be released," he said. "This decision has more to do with preventing embarrassment than protecting the system of government," he said.
The ban was criticised by MPs in all parties. Tony Wright, the Labour chairman of the Public Administration Committee, said it was of "considerable regret that this veto has been used for the first time". He added: "Won't the effect be simply to confirm people in the belief that there is something in that period that needs to be hidden?"
Liberal Democrat MP Sir Menzies Campbell said: "This is a Government which, when introducing measures to limit personal freedom, says that those that have nothing to hide should have nothing to fear.