The party had been advocating the establishment of a new Constitutional Court to carry out the task of refereeing clashes between Holyrood and London.

Under the government's devolution plans, future disagreements between the two bodies will be settled by the judicial committee of the Privy Council.

The Privy Council is made up of senior and long-standing politicians. But after a two hour debate in the Lords, as part of peers' consideration of the Scotland Bill, the Liberal Democrats withdrew their amendment without pushing the matter to a vote

The amendment had expressed concerns that the Lord Chancellor sits on cases where the government has a direct interest.

It argued that for Lord Irvine, a member of the cabinet, to sit as a judge in such cases flouts the separation of powers - a doctrine which forms part of Britain's, as yet, unwritten constitution.

But Lord Irvine told peers: "Where cases come to the judicial committee under the devolution legislation I will exercise my discretion not to sit where I consider it inappropriate to do so."