(Adds reaction by government, one former detainee)

By David Ljunggren

OTTAWA, Feb 23 (Reuters) - Canada's Supreme Court struck down a controversial anti-terror law on Friday that allows foreign suspects to be detained indefinitely without trial on the basis of secret evidence.

The court ruled unanimously that the government had broken the Charter of Rights and Freedoms by issuing so-called security certificates to imprison people, pending deportation, without giving them a chance to see the government's case.

"The overarching principle of fundamental justice that applies here is this: before the state can detain people for significant periods of time, it must accord them a fair judicial process," Chief Justice Beverley McLachlin wrote on behalf of all nine judges.

"The secrecy required by the (certificates) scheme denies the named person the opportunity to know the case out against him or her, and hence to challenge the government's case."

Critics compare the system to what is happening in the U.S. prison in Guantanamo, Cuba, where hundreds of foreign captives have been held as suspected terrorists without trial and mostly without charges.

The Ontario jail housing those detained under security certificates has been dubbed "Guantanamo North".

The court suspended the ruling for a year to allow Parliament time to rewrite the relevant part of the Immigration and Refugee Protection Act -- under which the certificates are issued -- to address the court's concerns.

But it also said prolonged periods of detention could be allowed for foreign suspects if the new version of the law conformed with the Charter. The court ruled on cases brought by three Arab Muslim men who were detained between 2001 and 2003 on suspicion they were part of al Qaeda.

"My name, my reputation -- I want them to be cleared. I am not a terrorist," said one of the men, Moroccan national Adil Charkaoui.

"I was never accused, I was never deemed guilty of a crime ... will they continue to harass me?" he told a news conference in Montreal. Authorities allege Charkaoui trained at an al Qaeda camp in Afghanistan.

Ottawa says the men can leave the country at any time but must remain in detention or under very close watch until then because they pose too much of a threat. The men say they could be tortured if they are sent back to their countries of birth.

Charkaoui and Algerian Mohamed Harkat have been granted bail under very strict conditions.

The three men argued that it was unfair that they were being treated differently from Canadian citizens suspected of terror links, who have more legal rights.

The Conservative government, which is unhappy with what it sees as a judicial system too soft on crime, said it was pleased the court had upheld the principle of the certificates.

"I am optimistic that we'll be able to put these changes in place," Public Safety Minister Stockwell Day told reporters.

The government criticized the opposition Liberals this week over their refusal to renew some provisions of anti-terror laws passed in the wake of the Sept. 11, 2001, suicide attacks on the United States.

"At a time when the opposition parties are being soft on security and soft on terrorism, Canada's ... government remains unwavering in its determination to safeguard national security," Day said earlier in a statement.

The court said while it recognized the state had a duty to protect citizens against acts of terror, the certificate system was too intrusive on the rights of individuals.

"I would declare the procedure to be inconsistent with the Charter, and hence of no force or effect," McLachlin wrote.

Ottawa says the third appellant, Syrian Hassan Almrei, arrived on a false passport and was in a forgery ring linked to Osama bin Laden that produced false documents.

A lower court judge has found Harkat lied about al Qaeda ties and about having assisted Islamic extremists.

The Supreme Court ruling said one way to improve the system of certificates would be to appoint a special advocate to challenge the security evidence.

(With additional reporting by Randall Palmer)

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