Secret justice looks set to be a regular feature of British courts and tribunals when the intelligence services want to protect their sources of information.

Civil courts, immigration panels and even coroner's inquests would go into secret session if the Government rules that hearing evidence in public could be a threat to national security.

The proposals, which run counter to a centuries-old British tradition of open justice, were introduced to a sparsely attended House of Commons yesterday by the Justice Secretary, Ken Clarke – and met almost no opposition. The planned changes to the British justice system follow lobbying of the Government by the CIA.

Civil rights groups warned a serious potential threat to individual liberty lurked behind the all-party consensus.

Mr Clarke is seeking to protect the Government from a repeat of a fiasco which has cost tens of millions of pounds and led to a breakdown in co-operation between British intelligence and an enraged CIA.

The best-known case involved Binyam Mohamed, a British resident who was held in Guantanamo Bay for five years, and started a claim for damages from the UK Government, which he accused of complicity in torture.

The Court of Appeal released a summary of CIA intelligence which supported Mr Mohamed's claim that British intelligence officers knew about the torture of suspected terrorists.

The CIA was furious and halted the flow of information from its headquarters in Langley, Virginia, and other US agencies apart from in the most serious cases. MI6 and the Foreign Office also received complaints from a number of other allied states anxious that information provided on a confidential basis would leak into the public domain.

Faced with irate colleagues at Langley, the British Government paid out to 16 terrorist suspects, to prevent further damage to US-UK relations. Yesterday, Mr Clarke let slip that the cases had already cost around £20m. Another 30 are in prospect because, he told MPs, "it is becoming fashionable" to challenge the Government in court.

Officials have privately complained that they cannot defend these cases without compromising sensitive intelligence, which means suspected terrorists have been able to use the civil courts as a "cashpoint".

If Mr Clarke's proposals are agreed, the power of the courts to order the intelligence services to disclose sensitive material will be curtailed. The Government is also planning to pass a law giving itself much more latitude to use what are called "closed material proceedings" in civil court cases and immigration tribunals, meaning the people at the centre of such cases would not be allowed to hear any evidence that MI5 or MI6 did not want them to hear. The material would, however, be examined by special advocates with security clearance.

There is also the prospect of grieving relatives being security vetted before they are allowed into inquests in cases which might involve sensitive material, such as the death of a terrorist suspect. If they refuse to be vetted, they would be barred.

Mr Clarke went out of his way to avoid a clash with Labour by reminding them that he was dealing with a problem they had to face in government, and emphasising that his Green Paper was "very green".

Mr Clarke told MPs: "The Government is clear that under the current system, justice is not being served and our national security is being put at risk. For justice to be done and the rule of law to be upheld, courts should be able to consider all the facts of the case. At the moment, we are not always getting at the truth because some evidence is too sensitive to disclose in open court."

Last night, a US diplomatic source said: "It is a long-established practice that intelligence supplied by an agency should not be released into the public domain without the say-so of that agency. We were assured when we resumed normal relations that what happened [in the Binyam Mohamed case] would be rectified. I do not know the ins and outs of the British legislature, but I am assuming that is what is happening."

But Clare Algar, executive director of the human rights charity Reprieve, said: "The Government is seeking to close off the very methods by which we first found out about UK complicity in torture and rendition. Were the measures proposed today in place at the time of the Binyam Mohamed case, the British public would never have known about the appalling abuses our own officials had been involved in."

Isabella Sankey, director of policy for Liberty, said: "The security services seem to think that having to compensate former Guantanamo detainees for failing in their duty to them justifies closing down open civil courts. These payouts should encourage the avoidance of complicity in torture not attempts to halt centuries of British justice."

Cases that could have been affected

Omagh bombing The bomb planted by the Real IRA, which killed 29 people including the mother of unborn twins, in Omagh in August 1998 was the worst atrocity of the Northern Irish conflict. No one was brought to criminal trial although it was never denied that the government spy centre, GCHQ, was monitoring the phone calls of Real IRA members. The intelligence services did not want a trial in which phone-tapping evidence would have to be made public.

July 7 bombing More than five years passed before the inquest finally opened last year into the deaths of 52 people murdered in London's worst terrorist outrage, partly over arguments about whether MI5's evidence should be heard in public. It was. The families of the four suicide bombers did not ask for full inquests, and the coroner decided not to hold them.

George Blake When Blake was arrested in 1961, after being exposed as a spy for the Russians, the government was so embarrassed that the Prime Minister, Harold Macmillan, wanted to let him off and keep his treachery secret but the intelligence services insisted on a trial, at which the main evidence was presented in secret. Blake was sentenced to 42 years, but escaped after five.

John Amery The wartime traitor, the son of a Tory MP, saved the authorities a great deal of embarrassment by pleading guilty. His trial lasted eight minutes. He was sentenced to death for treason and hanged on 19 December 1945.