The government could be forced to rewrite anti-terrorism legislation after the high court today ruled that orders to freeze the assets of terrorism suspects are unlawful.

Mr Justice Collins decided that the asset-freezing orders imposed by the Treasury were legally flawed because they was introduced without parliamentary debate by Gordon Brown, when he was chancellor.

The challenge to the sanctions was brought by five men, identified in court only as A, K, M, Q and G, who deny any link to terrorism and have no previous convictions.

Lawyers for the five had argued in court that the regime set up under the Orders to apply UN Security Council resolutions - aimed at suppressing the financing of terrorist acts - was harsh and unfair.

The measures - contained in the Terrorism (United Nations Measures) Order 2006 and the al-Qaida and Taliban (United Nations Measures) Order 2006 – have never been scrutinised, debated or approved by parliament.

Collins said: "Counsel for the applicants have submitted that the means used to apply the obligations imposed by the UN resolutions is unlawful. Parliament has been bypassed by the use of orders in council.

"But in deciding the appropriate way in which the obligation should be applied, and in particular in creating the criminal offences set out in the orders, it was necessary that parliamentary approval should be obtained. Those submissions are, in my judgment, entirely persuasive."

The judge added he was not saying that freezing orders could not be made to comply with UN resolutions. But he said "parliamentary approval should be obtained".

The asset-freezing order allows the government to freeze bank accounts, stop benefit payments and control the spending of people it has designated terror suspects.

Some 70 suspects are currently listed, and bank accounts containing about £500,000 have been frozen.

G, 27, born in the Middle East and now a British national living in London's east end, was the only claimant designated under both orders.

Earlier this week, the Times reported that ministers were considering incorporating asset-seizing powers into the counter-terrorism bill, if they lost the case.

The judgment is a further set back for the prime minister who is already facing a backbench rebellion over plans to lengthen the time that a terror suspect can be detained without charge to 42 days.