The prosecution is preparing to abandon the case against a former GCHQ employee charged with leaking information about a "dirty tricks" spying operation before the invasion of Iraq, the Guardian has learned.

Katharine Gun, 29, is due to appear at the Old Bailey next week where she has said she will plead not guilty to breaking the Official Secrets Act.

She has said her alleged disclosures exposed serious wrongdoing by the US and could have helped to prevent the deaths of Iraqis and British forces in an "illegal war".

The case is potentially hugely embarrassing for the government and would open up GCHQ operations to unwelcome publicity. Also damaging and politically threatening is her plan to seek the disclosure of the full advice from the attorney general, Lord Goldsmith, on the legality of the war against Iraq.

The government would almost certainly refuse to disclose such advice, arguing that opinions of its law officers are traditionally protected from the outside world. Ms Gun's lawyers were likely to argue she could not get a fair trial without seeing the attorney's advice on the war and the disclosure of GCHQ's activities.

Ben Emmerson QC, her counsel, told London's Bow Street magistrates court last month that she was being prevented from saying anything to her lawyers about her work at GCHQ.

Sources familiar with the case last night strongly indicated that the prosecution will ask the court to drop the case against her at a pre-trial hearing at the Old Bailey on Wednesday.

Ms Gun, a translator at GCHQ, was arrested in March but not charged until eight months later.

The long delay suggests that even then there was a fierce debate in government and GCHQ circles about the advisability of a secrets trial against an employee who said she acted out of conscience over an issue which divided the country.

Prosecutions under the Official Secrets Act need the consent of the attorney general. But the prosecution can advise the case should be dropped if a trial was considered to be against the public interest.

In sensitive cases in the past, the prosecution has dropped charges if the judge orders the disclosure of information the government and intelligence agencies say they cannot release.

A series of cases, many involving Customs, have been dropped in recent times because of a reluctance to disclose sensitive documents.

Ms Gun was arrested when it was reported that America's national security agency, GCHQ's US partner, was conducting a secret surveillance operation, bugging UN delegates' home and office telephones and emails.

The NSA told GCHQ that the particular targets of an eavesdropping "surge" were the delegates from Angola, Cameroon, Chile, Bulgaria, Guinea and Pakistan - the six crucial "swing votes" on the security council. A memo sent by Frank Koza, a senior NSA official, said the information from the eavesdropping would be used against the key UN delegations.

In a statement when she was charged, Ms Gun said: "Any disclosures that may have been made were justified because they exposed serious illegality and wrongdoing on the part of the US government which attempted to subvert our own security services. Secondly, they could have helped prevent widescale death and casualties amongst ordinary Iraqi people and UK forces in the course of an illegal war."

Senior Mexican and Chilean diplomats at the UN have since claimed their missions were spied on.

The former Mexican ambassador to the UN, Adolfo Aguilar Zinser, told the Observer newspaper this week that American officials intervened last March - days before the war was launched against Saddam Hussein - to halt secret UN negotiations for a compromise resolution to give weapons inspectors more time to complete their work.

He claimed the intervention could only have come as a result of secret surveillance of a meeting where the compromise was being worked on.

High-profile figures in the US who have signed a statement backing Ms Gun's case include actor Sean Penn, civil rights activist Jesse Jackson, president of the Newspaper Guild Linda Foley, and Daniel Ellsberg, who leaked the Pentagon Papers containing evidence of US involvement in Vietnam in 1971.

Ms Gun is currently on unconditional bail.

© Guardian Newspapers Limited 2004

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