Mr Ashdown was responding to the decision by the International Criminal Tribunal for the former Yugoslavia to issue an arrest warrant for President Milosevic.

Formal charges war crimes against the Yugoslav president are expected on Thursday.

Mr Ashdown said that the development should not stop Nato negotiating with the president.

But he said: "Should we sign any deal which would provide immunity for anybody who has committed war crimes? The answer is we shouldn't."

Paddy Ashdown: Milosevic should face due process of law

The move by the Tribunal has raised fears that finding a negotiated settlement may now become much harder.

The Labour chairman of the Foreign Affairs Select Committee Donald Anderson said: "It will complicate enormously the job of finding a solution because we cannot obviously negotiate with a war criminal.

"If we ask the simple question: 'Is this likely to make a solution easier or more difficult', I think that question answers itself - it will be infinitely more difficult to find a negotiated solution."

Mr Ashdown pointed out that President Milosevic is not yet a war criminal.

He said: "We need a legal entity to sign a peace agreement and if he is that legal entity he is entitled to sign it and we should accept that.

"But nothing that we agree should provide him or anyone else in his regime ... with immunity from due process of the law before the War Crimes Tribunal."

The development came as Nato confirmed plans to dramatically increase the amount of ground troops stationed around Kosovo's borders.