The Government is dropping its opposition to the Court of Appeal ruling that would allow Mohamed Al Fayed a British passport.

In a written answer to the House of Commons, the Home Secretary, Jack Straw, said the decision on the applications of Mr Al Fayed and his brother for UK citizenship would be made "on their merits".

The Court of Appeal had over-ruled a decision to refuse the Harrods owner citizenship, but its opinion was itself quashed by the last government.

Mr Al Fayed said in a statement: "This is an important step forward for the very many people in the same position as my brother Ali and myself who have had applications for naturalisation turned down but who have been denied the reason why.

Michael Howard turned down application

"I believe Mr Straw has acted in the best interests of everyone."

The Home Secretary said in future all applicants for citizenship who were turned down would be told the reasons for their refusal.

Mr Al Fayed's four children are British citizens but in 1995, the then Home Secretary, Michael Howard, refused his citizenship application.

In 1996, the Court of Appeal ruled this decision was unfair. It also overturned Mr Howard's decision on Ali Al Fayed, who had lived in the UK for more than 30 years.

The previous Government planned to appeal to the House of Lords against the Appeal Court ruling. Mr Straw said that he had now instructed those appeals to be withdrawn.

Decision on applications "falls to me"

"The effect of this is that the judgment of the Court of Appeal quashing the decisions made in 1995 to refuse these two applications now stands," he said.

"It will now fall to me to decide the applications on Mohamed and Ali Fayed, on their merits, and I cannot comment upon them further at this stage.

"I should also make clear that in reaching the decision on principle that reasons should be given in citizenship cases, I have not considered any of the original papers in the Fayeds' application."

Since the controversy over Mr Al Fayed's citizenship application he again became the focus of attention after the death of Diana, Princess of Wales.

Mr al-Fayed's spokesman Michael Cole speaking about Mr Straw's decision

The Princess was travelling with Mr Al Fayed's son, Dodi, when their Mercedes car crashed in Paris.

Both were killed in the crash, which also claimed the life of the driver, Henri Paul, who was an employee of the Paris Ritz, another business belonging to Mr Al Fayed.

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