He was jailed for refusing to leave barracks outside the capital Asuncion in April 1996 in defiance of a presidential order to relinquish his command of the military.

Correspondents say this effectively ends the legal proceedings against Mr Oviedo - a close political ally of the new President, Raul Cubas.

In 1997, Mr Oviedo was elected Colorado Party candidate for last May's presidential elections. Raul Cubas, his running mate, took over as candidate for the top job when the former commander was jailed.

The army tribunal's decision comes after Mr Cubas changed most of its members and ordered Mr Oviedo's release from jail.

"The military tribunal decided to annul all previous rulings in the case due to new evidence that it had previously been unaware of," the army said in a statement. It did not specify what the new evidence was.

Members of the Paraguayan Congress say Mr Cubas acted illegally and have asked the Supreme Court to overturn the president's decree.