British spies knew about detainee abuse but were told they did not have to intervene because they might damage relations with the US, a senior British judge has found.

The report, from Peter Gibson, comes from an inquiry intended to examine whether Britain was implicated in the mistreatment of detainees following the 9/11 attacks.

But it was scrapped earlier this year after Libya alleged that Britain was complicit in "rendition" - capturing people suspected of terrorism and transferring them to third countries without legal process.

Gibson found evidence that British spies had been aware of physical assault, sleep deprivation and the use of hoods.

"Officers were advised that, faced with apparent breaches of Geneva Convention standards, there was no obligation to

intervene," he said in the report.

Britain had been reluctant to complain about the ill-treatment of detainees for fear of damaging relations with allies, including the US, the report said.

Allegations of torture

In some cases, British officials failed to raise objections about renditions when they should have, while ministers were unaware of the operations.

After reviewing 20,000 documents, Gibson said he had found 27 issues that needed further investigation, including allegations of torture.

"Documents indicate that in some instances UK intelligence officers were aware of inappropriate interrogation techniques," the report said.

"(The) government or its agencies may have become inappropriately involved in some cases of rendition."

In response the British government said on Thursday that a parliamentary committee would take over from Gibson's role and look at Gibson's outstanding concerns.

Cabinet minister Ken Clarke said the inquiry's findings showed Britain's spy agencies had struggled to come to terms with the threat from armed groups after the 9/11 attacks.

Unprepared and inadequate

"It is now clear that our agencies and their staff were in some respects not prepared for the extreme demands suddenly

placed upon them," Clarke told parliament.

"Guidance regulating how intelligence officers should act was inadequate, the practices of some of our international partners should have been understood much sooner. Oversight was not robust enough."

The heads of MI5 and MI6, Britain's domestic and overseas intelligence agencies, have repeatedly said they would never use, or encourage others to use, torture to gain information.

In November 2010, however, Britain agreed to make payments to 16 former Guantanamo Bay detainees in settlements over claims they were mistreated abroad with the knowledge and in some cases complicity of British spies.