THE Government's policy on asylum seekers was in disarray last night after a landmark High Court human rights ruling.

Home Secretary David Blunkett reacted with dismay to the "deeply disturbing" court decision which could result in the release of hundreds of asylum seekers from a new fast-track immigration centre.

A senior judge held that four Iraqi Kurds, who now plan to seek thousands of pounds compensation, had been unlawfully detained at Oakington in Cambridgeshire so that their asylum claims could be processed more rapidly and efficiently.

The Government fears that, unless the decision is overturned on appeal, it could affect the attempt to operate "tough but fair" immigration controls.

The £4.5m showpiece centre at Oakington opened in March last year. Ministers hoped it would play a major role in reducing the backlog of more than 100,000 undecided asylum applications.

Latest Home Office figures show the centre has dealt with 8,916 applicants, plus 2,239 dependents such as spouses and children.

Yesterday, its operation was dealt a serious blow when Mr Justice Collins held that to impose detention just to speed up the determination of claims, when there was no threat of asylum seekers absconding and attempting to enter the country illegally, breached human rights laws.

The judge gave the Government permission to launch an urgent appeal, saying it was "obviously a matter of very considerable public importance".

In order to prevent a flood of legal claims from other Oakington detainees, the judge suspended making a formal declaration on the law pending the appeal hearing.

The Iraqi Kurds' solicitor, Michael Hanley, said: "My clients felt they were in prison in Oakington."

A Home Office spokesman said the Government aimed to go to the Court of Appeal by October 5. Mr Blunkett's lawyers argued that Oakington, near Cambridge, was a reception centre rather than a detention facility and its operation completely lawful.

Pending the appeal, operations will continue as normal at the centre, where asylum seekers are held for up to seven days, and sometimes longer, with no access to bail to ensure the rapid processing of their refugee claims.

A Home Office spokesman said: "The Home Secretary is deeply disturbed at the implications of the judgement for the effective operation of tough but fair immigration controls".

But campaigners for the rights of asylum seekers described yesterday's ruling as "a credit to British justice" and predicted that hundreds more refugees held at Oakington would now bring compensation claims.

Habib Rahman, chief executive of the Joint Council for the Welfare of Refugees, said: "In our view, the Government had no legs to stand on in this case, and it highlights the unfairness and harshness of their immigration policies."

Liberal Democrat home affairs spokesman Simon Hughes said: "We have always argued that it is contrary to the European Convention on Human Rights to detain asylum seekers, unless they have committed criminal offences or will be a danger to national security."

In the North-East, Holme House Prison, at Stockton, houses up to 59 asylum seekers.

Reacting to the ruling, Peter Widlinski, secretary of the North-East Coalition for Asylum Rights, said he had mixed emotions.

"First of all, I'm very pleased because to imprison asylum seekers, whether it's in a detention centre, reception centre or in prison, is disgraceful," he said.

"But on the other hand I'm angry that UK taxpayers are going to have to pay possibly millions of pounds in compensation."