Loyalist Johnny Adair will seek a judicial review to overturn his imprisonment, it was confirmed tonight.
Lawyers for Adair, who lost an appeal to the Sentence Review Commission last month, will argue that the decision to keep him inside contravenes European human rights legislation.
Adair, 37, from the loyalist Shankill Road area of west Belfast, was returned to jail in August at the height of the feud between the Ulster Freedom Fighters and the Ulster Volunteer Force.
The decision of the Sentence Review Commission last month to overturn its own preliminary ruling to free him has prompted Adair's lawyers to mount the fresh legal challenge.
The chairman of the Ulster Democratic Party, John White, a close associate of Adair, said that the decision was in breach of the legislation because evidence at his appeal was given behind closed doors.
"He was unable to defend himself against allegations which he has no idea where they came from or what they were," he said.
"I would hope that the judge would see the unfairness in this and refer it back to the Sentence Review Commissioners to review their decision.
The Ulster Freedom Fighters' lower Shankill commander was granted early release in September 1999 under the terms of the Belfast Agreement after serving less than a third of a 16-year sentence for directing terrorism.
But he was sent back to prison last August after Mr Mandelson revoked his early release on the basis of high-grade security evidence which pointed to Adair's presence fuelling tensions in the loyalist feud.
The Sentence Review Commission then issued a preliminary ruling last December recommending that Adair should be released.
But the then Secretary of State Peter Mandelson challenged this indication and it was overturned last month after a two day hearing inside Maghaberry Prison near Lisburn, Co Antrim.
The commissioners heard submissions from lawyers for the Northern Ireland Office, Royal Ulster Constabulary Chief Constable Sir Ronnie Flanagan and other senior police officers who were opposed to Adair's release.
It is the fact that some of the evidence provided by senior security figures was held without the presence of Adair's lawyers that will form the basis of his challenge under the European human rights legislation.
PA