Clarke defends secret court hearings as peers begin debating the plans
Ken Clarke has warned against "legalistic" opposition to plans to hold secret court hearings in cases relating to national security.
Peers are set to scrutinise the controversial proposals to allow more civil cases without claimants being able to hear evidence against them.
Evidence could be heard in secret where it risked the lives of UK security agents, the ex-justice secretary said.
But critics say the move is unnecessary and unfair.
The House of Lords is beginning detailed scrutiny of the Justice and Security Bill on Monday with opponents of the plans - including many Lib Dems, civil liberties campaigners and eminent members of the legal profession - seeking significant changes.
The government is under pressure to make further concessions amid signs of disquiet on its own backbenches and after Lib Dem activists voted to drop the plans at their party conference in September.
Ministers argue the law needs to be changed to prevent the UK becoming a magnet for people seeking taxpayer-funded settlements because they know sensitive security-based evidence cannot not be heard in public.
Last year, 16 terror suspects, including former Guantanamo Bay detainee Binyam Mohamed, received a multimillion-pound payout after they claimed they were mistreated by US and British security and intelligence officials.
'Stream of claims'
Mr Clarke, who retains responsibility for the bill despite being moved to a new position of minister without portfolio in September's reshuffle, said the law as it stood "simply cannot deal" with such cases.
"The only evidence that can be used to defend it is evidence from agents who are revealing their sources, saying what they know about organisations, explaining what part the British did or did not play," he told Radio 4's Today programme.
"And everybody agrees that that cannot possibly be given in open (session)."
The government had been unable to defend itself against the Guantanamo allegations since the judge was not allowed to take into account evidence from the security services - which he would have liked to seen be heard in court.
"As we cannot defend ourselves in such cases, a steady stream of claims is coming in," he added.
"What we have go to do is do justice, pay them compensation if they can prove there has been wrongdoing but actually have the judge able to consider it."
Evidence from the security services should be able to be challenged in court, not struck from the case as it is at the moment, enabling judges to consider "both sides" of the argument.
He added: "If I was an agent risking my life, if I was giving information to the British which would get me shot if anyone knew I was doing it...If I was the CIA sharing with us secrets which they did not want any risk of them going out, I would want the government's bill."
The proposals had already been significantly changed, he added, warning against attempts at further "legalistic amendments".
Although he believed some opponents would "never be satisfied", he said he believed there was a shared acceptance judges would want "to be as open as possible and only order secret hearings where lives are at risk."
But Lord Pannick, a QC and crossbench peer, told the same programme that closed hearings in national security cases were unnecessary as information regarded as sensitive could already be withdrawn under public interest immunity laws.
"The government's argument for this bill is not that security information needs to be concealed, because it already is," he said.
At the moment, he added, judges were able to balance the dual need for justice and security in open hearings by, for instance, ordering witnesses to give evidence behind a screen or ensuring the names of informers were redacted in documentary evidence.
Under the government's proposals, however, a judge could end up deciding a case "by reference to evidence produced by the government which is not seen by the other party in the case".
"The other party will have no proper opportunity to answer it. That's unfair."
Judges should not be under any obligation to hold proceedings in secret and should only do so if they are satisfied "there is no fairer way to decide the case only after balancing the need for a secret hearings against the damage to the fairness of proceedings."
"If a judge had a proper discretion, I am sure there would be very few, if any cases where these secret hearings would be ordered."
During Monday's consideration of the bill, peers rejected calls to change the status of an influential committee which oversees the work of the security and intelligence agencies.
A Labour-backed move to turn the intelligence and security committee (ISC), which currently reports directly to the prime minister, into a select committee of Parliament was rejected by 247 votes to 162.
A separate proposal to hold pre-appointment hearings for future heads of the MI5, MI6 or GCHQ was rejected by 200 votes to 170.