By Peter Griffiths
LONDON (Reuters) - British intelligence officers in Afghanistan knew about the mistreatment of suspected militants by the United States after the September 11, 2001 attacks, but were told not to intervene for fear of offending Washington, an inquiry found on Thursday.
In a series of episodes which the government said had damaged Britain's international reputation, the report also found that British spies had been involved in the U.S. practice of "rendition", in which captured militants were transferred without legal process to third countries.
"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."
Prime Minister David Cameron set up the inquiry in 2010 to examine if British agents worked with foreign security services, including from the United States, who stand accused of abusing detainees in Afghanistan, Iraq and Guantanamo Bay.
He was responding to allegations of torture, mistreatment and illegal transfers that have prompted a global debate about intelligence services' methods and accountability.
Retired senior judge Peter Gibson, who led the inquiry, found evidence that British spies had been aware of the abuse of detainees, including examples of physical assault, sleep deprivation and the use of hoods.
But he said they had been told they did not have to intervene.
"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 United States, the report said.
In some cases, British officials failed to raise objections about renditions when they should have, while ministers were sometimes kept in the dark about the operations, it added.
After reviewing 20,000 documents, Gibson said he had found 27 issues that needed further investigation, including allegations of torture, mistreatment and rendition.
Gibson's inquiry never reached the stage of interviewing witnesses or taking evidence because it was suspended in 2012 pending the outcome of criminal investigations.
The British government said on Thursday that parliament's Intelligence and Security Committee (ISC) would take over Gibson's duties and would look at the 27 concerns he raised.
Cabinet minister Ken Clarke said the inquiry's findings showed Britain's spy agencies had struggled to come to terms with the threat from Islamist groups after the 9/11 attacks.
"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, 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.
(Editing by Andrew Osborn and Mike Collett-White)