The Home Office has won an appeal against a damages claim to former IT contractor Raytheon, and avoided a 224 million payout relating to the cancellation of the e-Borders contract in the process.
The Whitehall department initially awarded the US defence firm a 750 million deal to design, develop and implement a technology deployment aimed at reforming the UK's border controls back in 2007.
The computer system was meant to perform police, security and immigration checks on people entering and leaving Britain.
However, the Home Office cancelled the contract three years later, claiming Raytheon had missed key milestones, while some parts of the project were running at least a year behind schedule.
Raytheon filed for unlawful termination of its contract against the Home Office in 2011, claiming substantial damages of 500 million.
Its claim was upheld by an arbitration tribunal last year, which awarded 224 million in compensation.
This sum comprised 50 million for damages, 9.6 million for disputes over changes to the original contract, 126 million for assets acquired from Raytheon by the Home Office, and legal costs.
However, the Home Office won its appeal in two judgements made public today.
Its lawyers, from Pinsent Masons law firm, said in a statement the High Court determined "the award had been tainted by serious irregularity so as to cause substantial injustice within the meaning of the Arbitration Act".
The ruling means, while the damages will not be paid, the case will be reheard by a new tribunal.
A Home Office spokesperson said: "We are pleased with the judgement handed down today by the court.
"However, the legal process is ongoing and it would be inappropriate for us to comment further at this time."
Raytheon said it plans to contest the decision with its own appeal.
A spokesperson said: "It is a fundamental principle of international business that awards of arbitral tribunals are respected and enforced by national courts.
"We believe that the arbitral tribunal considered and decided all relevant issues before it. Raytheon Systems Limited (RSL) is determined to pursue an appeal of this decision, to enforce the tribunal's award and to recover the sums due to RSL for wrongful termination of the e-Borders contract."
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