A pilot wrongly detained for almost five months accused of training 9/11 hijackers is challenging the government's refusal to compensate him.
Lotfi Raissi (centre) says his life was destroyed by the accusations
Lotfi Raissi, 32, was never charged with any offence after his arrest over the 2001 attacks on the US but was held in London's Belmarsh prison.
His lawyer told the High Court he was held "without any justification on the basis of a US extradition request".
Last year, the home secretary ruled he was not eligible for compensation.
Mr Raissi, an Algerian who is asking two High Court judges to overturn the Home Office's decision, claims the detention "damaged his reputation, lost him his liberty and caused him distress and psychiatric injury".
His QC, Edward Fitzgerald, told the judges: "His basic complaint arises from the fact that he was detained for four-and-a-half months without any justification on the basis of a US extradition request.
"We submit [the home secretary] has misdirected himself in law in the main decision letter and subsequent decision letters."
He added that the home secretary made the decisions in April and July 2005 "on the basis that the [Home Office compensation] scheme simply does not apply to extradition cases at all, and was never intended to apply".
Mr Raissi, from Chiswick, west London, was living at Colnbrook, Berkshire, near Heathrow Airport, when officers from the Metropolitan Police arrested him 10 days after the 11 September attacks.
He was released on bail from Belmarsh prison in February 2002 - two months later a judge declared there was no evidence linking him to the attacks.
Mr Fitzgerald told Lord Justice Auld and Mr Justice Wilkie at the High Court in London on Tuesday, that the allegations were "completely without foundation."
However, Mr Khawar Qureshi, who appeared for the home secretary, argued that the compensation scheme policy clearly did not apply "in an extradition context".
He also argued that the pilot could not claim a payment on the basis that his was an exceptional case.
Mr Qureshi argued that it could not be placed in the "exceptional" category because Mr Raissi had never been completely exonerated of the allegations made against him.
He went on to argue that, even though an English district judge had found there was no offence for which he could be extradited, this did not amount to exoneration.
The hearing continues on Wednesday.