The US National Security Agency circumvents UK law by offering, rather than being asked for, intelligence from global websites to their British counterparts, according to David Blunkett, who was home secretary at the time of the 9/11 attacks.
During a debate in the House of Commons on Monday the foreign secretary, William Hague, indicated that the law may need to be updated after Blunkett highlighted one of the key areas at the heart of investigations into whether Britain's GCHQ eavesdropping centre has abided by the law.
The exchanges between Blunkett and Hague came as the foreign secretary told MPs it was baseless to claim that GCHQ has circumvented UK law by obtaining intelligence from the US that it could not obtain by legal means in Britain.
Blunkett, who served as home secretary from 2001-04, indicated that the NSA was bypassing British law by sending information to its counterparts in Britain. British agents have to seek ministerial approval to request information from the US.
The former home secretary told MPs: "Yes we do need to dampen down fear, yes we do need to reinforce the fact that we are engaged in international cyberattack and the dangers that come from international global terrorism.
"But in doing that, in reinforcing and reassuring people about the way we handle their data, can we take a closer look at how other agencies – including the NSA and our friends and colleagues in the US – use material gathered from network and service providers and offer it rather than having it sought from them in a way that makes authorisation extremely difficult?"
But Hague responded: "[He] speaks of his own experience of the highly professional work of the agencies. The point he raises reinforces the importance of our agencies applying and upholding the laws of the UK about the data that they obtain from other intelligence agencies around the world. There may well be occasions over the coming years where we need to update and improve those procedures to take account of changes in technology."
It is understood that Blunkett's point about a distinction between being passed information and requesting information may lie at the heart of British investigations into the Snowden leak.
The foreign secretary refused to answer a question from the Labour MP and shadow cabinet member Tom Watson about whether he was told how the NSA collects information and on what date he was told about the Prism system.
Hague told Watson: "I am not commenting on information that has appeared in newspapers. We cannot conduct ourselves in these matters by commenting on every leak."
Hague made a statement to MPs after documents leaked by Edward Snowden suggested that GCHQ had generated 197 intelligence reports from the NSA-run Prism programme last year. The system would appear to allow GCHQ to bypass formal legal processes to access personal material, such as emails and photographs, from the world's biggest internet companies.
The foreign secretary insisted GCHQ had abided by the law. He told MPs: "It has been suggested GCHQ uses our partnership with the United States to get around UK law, obtaining information that they cannot legally obtain in the UK. I wish to be absolutely clear that this accusation is baseless.
"Any data obtained by us from the US involving UK nationals is subject to proper UK statutory controls and safeguards, including the relevant sections of the Intelligence Services Act, the Human Rights Act and the Regulation of Investigatory Powers Act. Our intelligence-sharing work with the United States is subject to ministerial and independent oversight and to scrutiny by the intelligence and security committee. Our intelligence agencies practise and uphold UK laws at all times, even when dealing with information from outside the UK."
Sir Malcolm Rifkind, the chairman of parliament's intelligence and security committee, told the Today programme on BBC Radio 4: "One of the big questions that is being asked is: if British intelligence agencies want to seek to know the content of emails, can they get round the normal law in the UK by simply asking an American agency to provide that information?.
"The law is actually quite clear. If the British intelligence agencies are seeking to know the content of emails about people living in the UK then they actually have to get lawful authority. Normally that means ministerial authority. That applies equally whether they are going to do the intercept themselves or whether they are going to ask somebody else to do it on their behalf."
Hague told MPs he received hundreds of requests a year from GCHQ and MI6 to approve operations. "The Intelligence Services Act of 1994 and the Regulation of Investigatory Powers Act of 2000 … require GCHQ and the other agencies to seek authorisation for their operations from a secretary of state, normally the foreign secretary or home secretary.
"As foreign secretary I receive hundreds of operational proposals from SIS and GCHQ every year. The proposals are detailed. They set out the planned operation, the potential risks and the intended benefits of the intelligence. They include comprehensive legal advice describing the basis for the operation and comments from senior foreign office officials and lawyers."