TONY Blair is facing the threat of legal action over his alleged intervention in a multi-million dollar compensation claim by British victims of IRA terrorism.

Lawyers for about 200 victims say the former prime minister and other government officials appeared to have "connived" with Colonel Muammar Gaddafi to block their claim against the Libyan regime that supplied Semtex for the IRA attacks.

They accuse Mr Blair of assisting a rogue regime to kill off their class action in a "scandalous and perverse" move and are considering taking both the former prime minister and the Government to court in the UK.

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An email seen by a Sunday newspaper appears to show Mr Blair intervened on behalf of Colonel Gaddafi in a legal row over compensation for victims of Libyan-sponsored terrorism.

It suggests Mr Blair helped broker a deal between the former Libyan leader and President George W Bush in which Libya paid $1.9 billion (£1bn) in compensation to American victims of terrorism but effectively ended the compensation hopes of British victims of IRA attacks, who had been pursuing Gaddafi through US courts.

Jason McCue, of McCue & Partners, which is representing about 200 British victims of IRA attacks carried out with Semtex supplied by Libya, said the disclosure could form the basis for legal action in Britain.

A spokesman for Mr Blair denied he had intervened. A spokeswoman said: "This persistent attempt to suggest that Tony Blair 'interfered' with the terms of compensation is malicious and wrong."

A Foreign Office spokesman said: "The claim that Government officials took any deliberate action that denied UK victims compensation in the 2008 settlement is wrong."

l Meanwhile, Mr Blair has said terrorism motivated by religious extremism is growing and the West needs a global strategy to tackle it.