SECRETARY of State Theresa Villiers has blocked a fresh inquest into the deaths of eight IRA men and a civilian shot dead by the SAS almost 30 years ago in a move branded as "profoundly wrong in principle" by Attorney General John Larkin's office.
It is believed to be the first time the British government has intervened to side step the Attorney General since he took up his post in 2010.
Since then Mr Larkin has ordered new inquests into a number of controversial Troubles related deaths including shoot-to-kill incidents.
News of the development came after his solicitor confirmed to human rights group the Committee on the Administration of Justice that Ms Villiers issued a certificate, right, blocking a fresh inquest last month claiming it may "be against the interests of national security."
Eight IRA men were killed by the SAS as they attacked Loughgall RUC station in Co Armagh on May 8 1987.
Civilian Anthony Hughes (36) from Caledon in Co Tyrone was also killed when, along with his brother, he drove unknowingly into the ambush.
The families of the victims believe no attempt was made to arrest them.
In May this year the Irish News revealed that the British government apologised to the Hughes family and confirmed he was "wholly innocent of any wrongdoing."
In their letter to the CAJ Mr Larkin's solicitor said: "The Attorney General wishes me to inform you that he considers the Secretary of State's decision to be profoundly wrong in principle and is currently reflecting on the appropriate response to it."
It is believed the inquest decision will now be taken by British Attorney General Dominic Grieve.
Relatives of those killed in Loughgall last night spoke of their disappointment at the decision.
Mairead Kelly, whose brother Patrick was one of the eight IRA men shot dead, also said she wasn't surprised by the move.
"They don't have to provide proof, do we know that there is something there to prevent this going ahead," she said.
"The truth is going to be damaging or they would let it go ahead."
Director of the Committee on the Administration of Justice, Brian Gormally hit out at the intervention.
"There is a relentless campaign, led by the UK Government and supported by some elements in Northern Ireland, to suppress the truth about the activities of state agents during the conflict," he said.
"The aim is to ensure impunity for any crimes and human rights violations committed by servants of the state, whether policemen, soldiers or secret agents. This is the latest stage in this epic cover-up, using the deliberately undefined concept of 'national security' to stifle a proper investigation."
Attorney General John Larkin had been considering the request for a new inquest for almost two years after the European Court of Human Rights previously found that there had been no proper investigation of the deaths.
Mr Gormally said his organisation will challenge the decision.
"We don't know why this case has been singled out for the 'national security' veto - is it because the SAS were involved, or did a UK Minister give the green light for the ambush?," he said.
"The point is, we don't know and we won't know if the UK Government has anything to do with it. This situation is not just an assault on the right to truth and transparency in a democratic society, but the lack of a proper investigation is a continuing human rights violation. We will contest this decision by all available means."