Fears have been raised about police powers
Conservative peers inflicted the government's first parliamentary defeat since the general election on part of the Anti-Terrorism, Crime and Security Bill last week.
A sign of the looming trouble for the government, which wants the bill on the statute book by Christmas, came late on Tuesday night when the Commons went into secret session for the first time since 1958.
The procedural move, which saw the chamber cleared of public, media and even the Hansard reporters who record proceedings, was forced by the Liberal Democrats.
EU-wide measures
It comes as new measures to fight crime and terrorism across Europe - including a fast-track extradition system - are due to be agreed by EU governments in Brussels.
Home Secretary David Blunkett is pressing for a Europe-wide arrest warrant.
He wants the euro laws to be as wide as possible, to complement the UK initiatives.
But Lib Dem and Tory peers are protesting at timetabling of the anti-terror timetabling of the anti-terror bill, which opposition MPs have described as "monstrous" and "tawdry".
Neither the Conservatives nor the Lib Dems say they want the bill to fail but both parties agree on the need to rewrite sections of the anti-terror plans.
Conservative Lords leader Lord Strathclyde said the next week would decide whether the legislation provided what the country wanted.
The result could be a tough anti-terror bill "focused on the powers needed to deter and defeat terrorism".
Consensus call
The alternative was a bill "put to Parliament by the government, which goes far beyond anti-terrorist measures and encroaches on ancient freedoms of British people".
The Tory peer went on: "We want a sensible, balanced effective measure, built on consensus and built to deliver justice and to protect justice."
Key areas where the opposition parties want the government to make concessions include:
Both the disclosure and judicial review issues are expected to be particular flashpoints when the Lords begins its report stage consideration of the bill on Thursday.
Both opposition parties also want all the new anti-terror laws to be subject to a "sunset clause", forcing it to be renewed by Parliament after a fixed time.
Home Office Minister Lord Rooker, who is steering the bill through the Lords, has argued the plans are a proportionate response to the terror attacks.
But Lord Rooker has hinted the government might be prepared to make some concessions to get the new laws in force quickly.