An Iraqi civilian said he believed he was going to die while being beaten by British soldiers in Basra in 2003.
Mr Matairi claims he was hooded and beaten by UK troops
Ahmad al-Matairi told the hearing at Bulford Camp, Wilts, that soldiers from the Queen's Lancashire Regiment took bets on who could make him fall down.
Hotel receptionist Baha Mousa, 26, was arrested during the raid and later died while in British custody.
Seven soldiers have been charged variously with treating Iraqi civilians inhumanely and manslaughter.
Mr Matairi, a hotel owner, came face-to-face with his alleged attackers at the court martial.
He was arrested on suspicion of being an insurgent and told the hearing he was forced to lie on the floor with his staff while the troops gave him "insult kicks".
The father-of-three said the soldiers guarding him celebrated beating him and a group of other Iraqis "like it was Christmas".
Mr Matairi, who had a brother killed by Saddam Hussein's regime, gave evidence to the court through an interpreter.
He said he felt hurt at being ill-treated by British soldiers he had welcomed to Iraq.
"I put flowers in my children's hands to welcome the British soldiers when they came to free us from Saddam," he said.
CHARGES IN FULL
Cpl Donald Payne - manslaughter, inhumane treatment of persons, perverting the course of justice
L/Cpl Wayne Crowcroft - inhumane treatment of persons
Pte Darren Fallon - inhumane treatment of persons
Sgt Kelvin Stacey - actual bodily harm, alternatively assault
Warrant Officer Mark Davies - negligently performing a duty
Maj Michael Peebles - negligently performing a duty
Col Jorge Mendonca - negligently performing a duty
"I could not believe that these were criminals from Britain. According to our knowledge it was a civilised country so I could not believe it.
"We were hit all the time, continuously without knowing the reason why."
A total of nine Iraqis claim they were hooded and beaten after being detained.
Mr Matairi, who is the first of the Iraqi witnesses to give evidence, also claimed that the equivalent of US$3,100 (£1,635) was taken from a safe by the soldiers.
"Passing by me lying on the floor, he would hit me with his boots on the head - an insult kick," Mr Matairi told the hearing.
Prosecutor Julian Bevan QC described the soldiers' behaviour at the Basra holding centre where detainees were taken as "systematic abuse".
The inhumane treatment of persons charge faced by three soldiers - Cpl Donald Payne, L/Cpl Wayne Crowcroft and Pte Darren Fallon - is being brought as a war crime charge under the International Criminal Court Act (ICCA) 2001.
It is the first time British military personnel have been prosecuted under the act.
Cpl Payne, 35, pleaded guilty to treating detainees inhumanely at the start of the court martial - making him the first British serviceman to admit a war crime.
He denies manslaughter and perverting the course of justice.
The other six soldiers each deny the charges they face - ranging from negligence and assault, through to manslaughter.
Col Jorge Mendonca, Maj Michael Peebles and Warrant Officer Mark Davies are all charged with negligently performing a duty.
Sgt Kelvin Stacey is accused of assault occasioning actual bodily harm with an alternative count of common assault.
L/Cpl Wayne Crowcroft and Pte Darren Fallon are charged with inhumane treatment of persons.
The Queen's Lancashire Regiment now forms part of the Duke of Lancaster's Regiment. The court martial, at the Military Court Centre on Salisbury Plain, continues.