Detainees at Camp Ashraf in Iraq are being subjected to "intimidation" which "appears to be organised or permitted by the Iraqi government", FCO spokesman Lord Howell of Guilford has said.
Camp Ashraf, close to the border with Iran, houses 3,500 Iranian dissidents.
At oral questions on 25 January 2011, Labour peer Lord Corbett of Castle Vale claimed that "Iraqi thugs in uniform" had set up about 180 loudspeakers outside the camp "blaring out threats to kill Ashraf residents" and thrown stones at them.
He said the conditions amounted to "psychological torture", calling on the UK to urge the UN to set up a monitoring force in the camp to prevent further abuse.
The detainees are members of the People's Mujahideen of Iran (PMOI), also known as the Mujahideen Khalq Organisation, which is regarded as a terrorist group by Iran and the US.
But the PMOI, which in the past was behind bombings against both the clerical leaders of Iran and their predecessor the Shah, was taken off an EU list of terrorist groups in 2009.
Lord Howell told Lord Corbett: "I know the noble Lord appreciates that this is Iraqi government sovereign territory and therefore we have to make our approaches, apply our pressure and express our concerns, which he expresses so well, through the Iraqi government."
But he warned: "It is a miserable situation and I hope it does not turn into an even worse tragedy."
Peers also heard questions on national museum and gallery funding, improving defence procurement, and giving prisoners the right to vote.