Caroline Lucas MP said the CPS has not seen all the evidence against Babar Ahmad, facing extradition on terrorism offences to the United States.
Mr Ahmad’s family say he can be prosecuted in the UK because his alleged offences occurred here.
The CPS told the BBC it had never been in possession “of all the US evidence”.
What evidence it had been sent from the US could only legally be used for the purposes of the extradition process and not shared to support a UK trial, it said in a statement.
Mr Ahmad is being held in a maximum security prison while he awaits the outcome of his case at the European Court of Human Rights.
He is alleged to have used websites operated from London, but technically based in the US, to raise money for extremists in Afghanistan and Chechnya.
Scotland Yard detectives arrested Mr Ahmad in 2003 and then released him without charge. The suspect was detained again in August 2004 pending extradition to the US where he faces a possible life sentence.
His seven years detention without trial is the longest period in modern history a British citizen has been in jail without an outcome to their case.
BABAR AHMAD CASE
Arrested and released without charge 2003
Arrested to face extradition 2004
Detained since then – case currently before the European Court of Human Rights
Green MP Caroline Lucas said that the CPS had said for years there was insufficient evidence to charge Mr Ahmad with an offence under UK law.
But she said that all the detailed evidence collected by the police when Mr Ahmad was first detained had been handed to US prosecutors, rather than British.
The CPS disclosed what had happened to the evidence in a letter to Mr Ahmad’s lawyers, sent on Wednesday. His legal team have been demanding a review of the case after 140,000 people signed an official e-petition supporting a British trial, triggering the debate in Westminster Hall.
Ms Lucas told MPs in the hall: “Last night, Babar’s lawyer received a letter from the CPS, admitting – for the first time – that the CPS were never given the evidence sent to the US save for a few documents.
‘No proper decision’
“The bulk of the evidence was shipped straight to the US by the police. So, astoundingly, while we had previously been lead to believe that the CPS had seen all of the evidence, we now get a confession that the CPS haven’t even seen, let alone investigated, the evidence properly.
“So a proper decision has not been made on whether a prosecution could go ahead in the UK.”
Domestic prosecutors were aware of the nature of the evidence in the possession of the US but the material was never subject to review in this country as it forms part of the case built by the US”
The BBC understands that the CPS was asked in 2004 to advise police if it was possible to charge Mr Ahmad with a narrow offence relating to documents that could be useful to terrorism, carrying a maximum sentence of 10 years. Prosecutors did not look at the alleged terror fundraising allegations, even though such a crime exists under the Terrorism Act 2000.
Ms Lucas called on the CPS to obtain all of the files from the US authorities and review them completely. She also called for a public inquiry.
She told MPs: “The CPS knew all along that they didn’t have all the evidence, yet they have let Babar Ahmad languish in a maximum security prison with the threat of extradition to the US, under the false belief that the CPS had seen all the evidence against him.
“This is appalling.”
In a statement to the BBC, the CPS said it had two separate roles in the case – one to act on behalf of the US in extradition proceeding and the other to consider domestic charges.
“The CPS was sent some of the evidence gathered by the US authorities upon which a prime facie case was argued, as is normal procedure in extradition matters.
‘Duty of confidentiality’
“We were never in possession of all the US evidence and have never claimed otherwise. This evidence could only be used and considered for the purpose of the extradition and not for any other process. The CPS extradition unit can not and does not share information as it is bound by a duty of confidentiality.”
The CPS said prosecutors had separately considered offences based on evidence supplied by British police.
“At the time this advice was given, domestic prosecutors were aware of the nature of the evidence in the possession of the US but the material was never subject to review in this country as it forms part of the case built by the US.”
Mr Ahmad’s case is awaiting a final decision from the European Court of Human Rights on whether his extradition is lawful. His lawyers say he will face inhumane conditions if sentenced to life in a “supermax” jail. The US has already given an assurance to the UK that Mr Ahmad would not face the death penalty.