A collapsed court martial against seven UK soldiers accused of killing an Iraqi should have been brought, Defence Minister Adam Ingram has maintained.
Adam Ingram praised the performance of UK soldiers in Iraq
Mr Ingram, replying to shadow defence secretary Michael Ancram, told the Commons "no soldier is above the law".
A comprehensive review was under way following the case, he told MPs.
Last week, a judge dropped charges against the men, accused of killing Nadhem Abdullah, 18, in May 2003, because of "insufficient evidence".
Mr Abdullah was alleged to have died following an attack on Iraqi civilians in al-Ferkah, southern Iraq.
"This case has shown our determination to ensure that justice is done irrespective of the difficulties," Mr Ingram said on Monday afternoon.
"We're very sensitive to the ordeal that these soldiers have been through.
"They've acted with dignity throughout and we hope now they'll be given respect and privacy to enable them to continue with their lives."
More than 80,000 servicemen and women had served in Iraq with "only a very small number" accused of ill treatment by Iraqi civilians, he said.
"Our troops in Iraq continue to perform outstandingly but they are not above the law," he added.
Answering criticisms that evidence had been too weak for a trial, Mr Ingram said the Royal Military Police (RMP) had operated "in a hostile and volatile environment which clearly impacted on some aspects of their investigation".
The decision to prosecute was taken by the Army Prosecuting Authority (APA) based on RMP evidence, he added.
Shadow defence secretary Michael Ancram said the bringing of the case was damaging to the morale of troops operating in a "highly dangerous and hostile environment".
British troops could not effectively operate with the "spectre of the lawyer metaphorically looking over their shoulder".
"The battlefield is not a court of law and actions often have to be taken spontaneously.
"In the proper pursuit of justice, we must never compromise the ability of our armed forces to fight and to win," he added.
The cleared soldiers, who always denied murder and violent disorder, are Corporal Scott Evans, 32, and Privates Billy Nerney, 24, Samuel May, 25, Morne Vosloo, 26, Daniel Harding, 25, Roberto Di Gregorio, 24, and Scott Jackson, 26.
During the court martial, Martin Heslop QC, prosecuting, told the court Mr Abdullah was an "innocent" teenager who died after he and another man were dragged out of a white taxi and attacked with "feet, fists, helmets and rifles".
Judge Blackett directed the panel hearing the court martial in Colchester, Essex, to return a not guilty verdict on all seven defendants after criticising the "inadequate" investigation into the case.
"It has become clear to everyone involved as the trial has progressed that the main Iraqi witnesses had colluded to exaggerate and lie about the incident," he said.