Canada's refugee board has been ordered to take another look at an American deserter's failed bid for asylum in an unprecedented court ruling that could affect scores of other U.S. soldiers who have refused to fight in Iraq.

In Friday's decision, which came as Americans celebrated Independence Day, the Federal Court found the Immigration and Refugee Board made mistakes in turning down Joshua Key's claim for asylum.

"It's quite a statement," Key, 30, told The Canadian Press from his home in Saskatchewan.

"It makes us feel good – probably everybody within this whole process."

A married father of four, Key served as a combat engineer for eight months in Iraq 2003. He said American soldiers committed savage acts against civilians and routinely killed innocent people.

While the board deemed him credible, it nixed his claim for refugee status on the grounds he was not required to systematically commit war crimes even if he had to violate the Geneva Conventions.

Federal Court Justice Robert Barnes disagreed with that analysis.

"Officially condoned military misconduct falling well short of a war crime may support a claim to refugee protection," Barnes wrote.

Military action that "systematically degrades, abuses or humiliates" either combatants or non-combatants could provide such support, he said.

Lee Zaslofsky, of the War Resisters Support Campaign, was ecstatic on learning of Friday's ruling.

"Oh my God, that's wonderful," said Zaslofsky, who came to Canada from the U.S. in the 1970s to avoid the Vietnam War draft.

"Oh wow. Oh wow. That's big. That affects all cases."

Key, a native of Oklahoma, fled to Canada after deserting during a leave in November 2003. Punishing him for following his conscience would be unjust, he said.

"You're treated unfairly just for not wanting to go kill innocent people."

In turning down several similar asylum claims, the refugee board has consistently held that the United States is a democracy, which affords deserters due judicial process.

However, the court said the board should hear evidence on whether deserters can rely on the American government to treat them fairly.

"State protection has been a very prominent issue that we have felt has just simply not been given the kind of attention it requires," Zaslofsky said.

"It doesn't appear feasible for people like Joshua Key and the other war resisters to rely on state protection that people would normally be able to rely on – even in a democracy like the United States."

Key's lawyer, Jeffry House, said the ruling expands a soldier's right to refuse military service.

"It's a huge victory for numerous soldiers who are here and maybe others who are thinking of coming here," House said.

New Democrat politician Olivia Chow called on Prime Minister Stephen Harper to rethink his government's policy of excluding American war dodgers.

"Rather than wasting time and money for people to go through that whole refugee process, the Federal Court has spoken out loud and clear," Chow said.

Parliament, she noted, has also passed a resolution calling for deserters to be allowed to stay in Canada.

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The resolution also urges a stay of deportation proceedings against soldiers such as Corey Glass, who is due to be removed from Canada next week.

A spokeswoman for Immigration Minister Diane Finley said they were reviewing the court decision.