Intelligence relationships between the UK and other countries could be "seriously jeopardised" unless judges are allowed to hear evidence in secret, a former MI5 chief has said.
General Baroness Manningham-Buller said in a letter to The Times that it would be "dangerous" for the UK if the proposals did not become law.
The Government has said it is wasting millions of pounds of taxpayers' money on settling claims, some of which may have no merit, because it is unable to contest them as the evidence it would wish to produce is so secret that it cannot be revealed in an open court.
The former director general backed the Justice and Security Bill which would grant judges the choice to listen parts of civil cases, including claims for mistreatment, in private without claimants being able to hear some of the evidence against them.
She said: "The Bill also aims to close a legal loophole that seriously jeopardises the intelligence relationships between the UK and other countries.
"Unless this loophole is closed, the flow of intelligence from other countries, which according to the Independent Reviewer of Terrorism Legislation, has already been reduced, will slow to a trickle," she said.
"That would be dangerous for the UK as so many of the threats we face are global and we need foreign intelligence to understand and counter them."
She added that the reforms would allow the cases to be properly judged for the first time.
She said: "Because the secret material held by the authorities cannot be used in court, the Government is forced to settle without a judge examining the merits of the claim.
"This is immensely damaging to the reputation of the Government and the intelligence and security agencies, which cannot defend themselves."