'The decision to shut the case means that the crown prosecutor found no basis on which to charge Krekar with any crime and he therefore has the right, from a legal standpoint, to be considered innocent of the accusations,' the crown prosecutor's office said.

Krekar has lived in Norway as a refugee since 1991. Norwegian police have been investigating his activities since September 2002, including funding terrorist groups and a possible involvement in a conspiracy to murder Kurdish-Iraqi political rivals. Krekar denied all charges.

Krekar founded Ansar al-Islam, which appears on the US list of terrorist organisations, in December 2001 although he claims not to have led the group since May 2002. The US believes the group has mounted attacks against US-led forces in Iraq. US Secretary of State Colin Powell also alleged that Ansar al-Islam was linked to Saddam Hussein, but no such link has been proven.

Ansar al-Islam had a stronghold in northeastern Iraq before suffering defeat by US forces in March 2003. It had between 700 and 900 members.