Lord Falconer's historic post would be abolished under the changes
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The House of Lords has defeated government hopes of pushing through plans to abolish the post of lord chancellor and set up a supreme court.
Tory and crossbench peers voted 216 to 183 to send the Constitutional Reform Bill to a special Lords select committee for extra scrutiny.
Lords Leader Baroness Amos accused opponents of "political opportunism".
Tories have urged ministers not to ignore "the voice of Parliament" by using powers to force the bill through.
Baroness Amos said: "Make no mistake, tonight's events have nothing to do with constitutional principle - and everything to do with political opportunism."
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The House of Lords has done everyone a favour who is interested in seeing a good system of justice in this country
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BBC political editor Andrew Marr said the defeat meant ministers might not be able to get the plans through before the next general election.
The government must now decide whether to withdraw the Bill and reintroduce it in the Commons so it can use the Parliament Act to force through the changes.
Tory Lords leader Lord Strathclyde said: "Any suggestion that the views of Commons and Lords on scrutiny should now be bypassed by withdrawing this Bill and laying a new one would be an act of
petulance."
He argued that it would be "the mark of a government unwilling to listen to the voice of
Parliament".
Alan Duncan MP, the Conservatives' spokesman on constitutional affairs, told BBC News 24: "The House of Lords has done everyone a favour who is interested in seeing a good system of justice in this country."
The Tories deny claims they simply tried to kill the Bill, arguing they just want more time to get the details right.
'Orchestrated rebellion'
But Labour backbencher Clive Soley criticised what he described as "a very deliberate attempt" by a large proportion of Tories in the Lords to wreck the government's moves for change.
Mr Soley, a member of the Commons constitutional affairs committee, said the government had to deal with the issue and should use the Parliament Act if necessary.
"We cannot go on with this system where the law lords sit in the same body that makes the laws and, at the same time, that body is still largely unrepresentative of the UK as a whole."
Liberal Democrat spokesman Lord Goodhart said he was angry an important bill had been delayed.
The Bill seeks to establish a new independent commission to appoint judges.
Lord Goodhart said judges believed that was urgently needed as the current system was in "limbo".
The committee of law lords in the House of Lords currently acts as the court for final appeals in the UK.
The proposed reforms would leave that job to a new supreme court working completely separately from Parliament.
The government says that change will protect the independence of the judiciary and set clear boundaries between politicians and judges.
'Change needed'
But former law lord Lord Lloyd, a crossbench peer, pressed for the Bill to be given further scrutiny by a Lords select committee.
He said a closer look was needed at the costs of a supreme court, adding: "It's not too late to save the office of Lord Chancellor - that's what I hope we shall do."
Opening the second reading debate, Lord Chancellor Lord Falconer said sending the Bill to a special committee could mean MPs never had a say on the issue.
The current system had worked well in recent years but one failure would undermine it, he said.
"We should change when we are strong, we should recognise that we can improve the system," he argued, rejecting any suggestion the new court would be "second rate".