Gordon Brown is facing a new battle over key anti-terrorism laws this week with the High Court set to rule against powers to freeze suspects’ bank accounts.

Five men who deny any link to terrorism and have no previous convictions are challenging the Government’s powers to freeze bank accounts, stop benefit payments and control the spending of people it has designated terror suspects.

The judgment is to be delivered on Thursday by Mr Justice Collins. If the Government loses, The Times has learnt that it is considering rewriting the Counter-terrorism Bill to include asset-seizing powers.

Thursday’s ruling could exacerbate the tension between the Government and judiciary. Last week the High Court ruled that the extremist cleric Abu Qatada could not be deported to Jordan because he would be at risk of torture.

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The counter-terrorism legislation is already at the centre of controversy over proposals to lengthen the time that a suspect can be detained without charge to 42 days.

The power to designate people as terror suspects and freeze their finances was introduced without parliamentary debate by Mr Brown when he was Chancellor. He has declared that the Treasury has become a “department for security”.

Treasury officials maintain two lists of suspects — thought to number around 70 people in total — and have frozen bank accounts containing around £500,000 in all.

Mr Justice Collins indicated his concern this month during a hearing when he described elements of the sanctions as “unfair and not proportionate”. He criticised the requirement for designated suspects to apply to the Treasury for a licence before they could get legal advice about the designation.

The judge said that it was “totally unacceptable” that a suspect “needed a licence from the Executive and body imposing the sanctions”.

The challenge to the sanctions regime has been brought by five men identified in court only as A, K, M, Q and G. They were notified of their designation in identical letters that stated: “The Treasury has reasonable grounds to suspect that you are, or may be, a person who facilitates the commission of acts of terrorism. In the light of the sensitive nature of the information on which this decision was taken we are unable to give you further details.”

Under the sanctions, the men must apply for basic expenses licences from the Treasury to get spending money of £10 per week.

Officials in the Treasury monitor the suspects’ grocery bills and decide whether they are allowed to accept gifts. Anyone found to have given a designated suspect an “economic resource” is liable to prosecution and a jail term of seven years. Lawyers for the men say that the orders – Britain’s interpretation of two United Nations Security Council resolutions – are unlawful on several grounds.

They argue that it is unconstitutional for the Government to have accrued the powers to freeze assets through Orders in Council rather than parliamentary legislation. The effect was to give the Government power to impose stringent sanctions on individual citizens without parliamentary debate.

Similarly, the men argue that the introduction of a criminal offence of assisting a designated person should not have been carried out without proper parliamentary scrutiny.

They also claim that the Government acted illegally by going farther in its measures than the UN intended and may have exceeded its powers under the United Nations Act 1946. Another argument is the lack of an appeal mechanism through the courts.

The suspect G was told that he had been designated by the UN Sanctions Committee and would have to appeal to it if he wanted his name removed.

He has found it impossible to appeal because he is not allowed to see the evidence that led to his designation, and he cannot discover who sits on the committee. He has also learnt that the Government, through which he is expected to lobby the UN, is the body that recommended that he be designated as a terror suspect.

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