"Welcome to Denmark's Tora Bora," says Bobby Schultz, gesturing towards a rickety hot-dog van at the junction between two busy streets in Copenhagen's fashionable Norrebo district.

It is an unlikely terrorist hideout, inhabited by an even less likely terrorist. But in the eyes of Denmark's ministry of justice, Preben Mikkelson, the 56-year-old grandfather cheerfully grilling half a dozen different kinds of sausages by the roadside earlier this week is at the very least a terrorist sympathiser. And if the Danish justice minister, Lene Espersen, has her way, soon his only contact with the culinary world will be prison rations.

Alongside Schultz and five other Danes, Mikkelson could be in jail by Christmas for his part in one of Europe's most curious court cases: the so-called T-shirt terror trial. His crime was sticking a poster up in his van for a brand of T-shirts bearing the logos of two groups classed by the EU as terrorist organisations: the Popular Front for the Liberation of Palestine (PFLP) and the Revolutionary Armed Forces of Colombia (Farc).

The T-shirts were designed, printed, marketed, and sold over the internet for £15 (about £3.50 of which was to go to PFLP and Farc) by his co-accused - a teacher, two students, a copy shop owner, a website host and Schultz, a government worker.

All are members of a Danish activist group called Fighters+Lovers and are charged with "sponsoring terrorism", a crime under post-9/11 Danish anti-terror laws that carries a maximum prison sentence of 10 years. The case against them has caused the biggest debate about free speech in Denmark since the 2005 row about cartoons featuring the prophet Muhammad, and has been rumbling along in a Copenhagen court since September. A verdict is expected on December 13.

F+L describes itself as "a private enterprise dedicated to the cause of freedom and hard-rocking street gear". Pictures on the company's website show the gear modelled by beautiful people with even suntans and moody expressions doing rebellious things. One shot shows a young Adonis in sunglasses scaling a fence wearing a bright yellow T-shirt with a pink Farc insignia and a picture of a gun.

The fashion world is no stranger to controversy, but some may question F+L's influences. One of their muses is the Palestinian hijacker Leila Khaled, whose "stylish classic coolness" the group praises, alongside "the funky outrageous style of [the late] Colombian guerrilla commander Jacobo Arenas" who founded Farc in the 1960s.

Schultz (not his real name: under Danish law defendants' names are only made public if they are found guilty) does not accept F+L's activities glamorise war and make armed struggle sexy.

But one of his co-defendants, Katrine Willumsen, a 24-year-old student who is happy for her real name to be used, admits it is potentially a problem.

"But as the person who put together the hundreds of T-shirt orders we received from around the world before we got arrested, I can tell you that the majority of our customers were fat, old men," she said. She knows the buyers were not hip young things because almost everyone asked for XXL size, and they had "old-fashioned names".

All the defendants are adamant they have not committed any crime. They believe the EU "terror list" to be undemocratic because it is drawn up behind closed doors according to unknown criteria, and say that both PFLP and Farc are not terrorists but legitimate resistance movements comparable with Denmark's own Nazi resistance during the second world war. They say that neither group is classed as a terrorist organisation by the UK, which does not defer to the EU on such matters.

What's more, they say, they weren't financing any sort of violence, as the £3.50 from each T-shirt sale that would have gone to the two organisations was earmarked for "humanitarian projects" such as equipment for radio stations.

In the event, the money never reached Palestine or Colombia: by the time around 600 orders had been received, in February 2006, the defendants were arrested after an extensive surveillance operation, their computers and remaining T-shirts confiscated (even the smelly ones lingering in the defendants' washing baskets) and the company's bank account frozen.

The trial began on September 20, and quickly became far more than a case merely about the seven. As the case unfolded, featuring terrorism experts from the USA, Israel and South America as witnesses, it became the court's responsibility to decide whether Farc and the PFLP are terrorist organisations or freedom fighters, and judge the legality of the Israeli occupation of Palestinian lands and whether the Colombian government is a democratic regime.

As the prosecuting lawyer, Lone Damgaard, told Copenhagen city court: "It is not easy to decide what constitutes terror."

Whatever is decided on December 13, this case is almost certainly not closed. The loser is likely to appeal: F+L has already announced that if its members are found guilty they will appeal to a higher court, taking the case to the European court of human rights in Strasbourg if necessary. And it turns out that because the case began in a municipal court, which does not have full sentencing powers, the maximum sentence any of the defendants could receive is four years.

Meanwhile, the F+L Seven haven't let the prospect of a Christmas in jail sour their creative juices. They have given up on T-shirts for now, and instead turned their attention to gold branded lighters bearing the legend: "A fire for fighters and a light for lovers." And business, says Schultz, is booming.

· This article was amended on Thursday November 29 2007.