A federal appeals court in the US has thrown out the murder conviction of a former Blackwater security guard accused of being involved in the killing 14 unarmed Iraqi civilians at a Baghdad traffic circle in 2007.

The US Court of Appeals for the District of Columbia Circuit ordered on Friday a new trial after tossing out the murder conviction of Nicholas Slatten, the former security contractor.

The defendants were convicted in October 2014. Slatten had been sentenced to life in prison.

At a new trial, Slatten would be able to introduce evidence that one of his co-defendants had fired the first shot and not him.

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The three-judge panel also ordered three of Slatten's former colleagues to be re-sentenced in the prosecution arising from the massacre.

The court said Paul Slough, Dustin Heard and Evan Liberty, who were all convicted of manslaughter and other offences over their respective roles in the incident, should be re-sentenced because their 30-year prison terms were too long.

The court also threw out one of Liberty's convictions for attempted manslaughter.

'Dramatic' and 'unusual'

The justice department declined to comment. Lawyers for the defendants could not immediately be reached.

Al Jazeera's Patty Culhane, reporting from Washington DC, called the decision "dramatic" and "unusual".

"Obviously this is going to cause a great deal of controversy in Iraq," she said.

The September 16, 2007, incident stood out even in a city in a grip of a deadly sectarian war and prompted debate over the role of private security contractors working for the US government in war zones.

A heavily armed, four-vehicle Blackwater Worldwide convoy the men were travelling in had been trying to clear a path for US diplomats after a nearby car bomb.

At Nisour Square, the four guards opened fire on the Iraqis, including women and children, with machine guns and grenade launchers.

In addition to the 14 dead, another 17 Iraqis were wounded.

Slatten's murder conviction was for shooting dead the driver of a white Kia car that had stopped at the traffic circle.

The justice department's case against Slatten, "hinged on his having fired the first shots, his animosity toward the Iraqis having led him to target the white Kia unprovoked", the court said in the unsigned ruling.

But the statements made by the unnamed co-defendant immediately afterwards that he fired the first shot "strike at the heart of that theory and instead point to the co-defendant, not Slatten", the court said.

Blackwater was later sold and is now operating as Virginia-based Academi.