Mr John Gilligan was granted unconditional bail on English drug-trafficking and money-laundering charges at Woolwich Crown Court in London yesterday.
However, he remains in custody as he awaits the outcome of his latest legal challenge against his return to Ireland to face trial for the murder of Veronica Guerin and drugs and firearms offences.
The Crown must make its position clear next Monday as to whether it will proceed with the English trial or drop the charges against Mr Gilligan.
The unexpected decision to grant bail came after Judge James Rucker refused a Crown application, on behalf of Customs and Excise, to extend custody time limits beyond February 3rd when Mr Gilligan will mount a new challenge in the divisional court, on a writ of habeas corpus, against his return to Ireland.
Refusing an application by Ms Jane Bewsey, for the Crown, to set bail conditions, Judge Rucker pointed out that if Mr Gilligan were convicted on the English charges, he would in effect walk free, because the sentence would take into account remission and the fact he had spent more than three years in custody awaiting trial.
Mr Gilligan, who smiled broadly when Judge Rucker granted unconditional bail, was arrested at Heathrow Airport in October 1996. However, in September 1997 it was decided that the Irish charges took precedence over the English charges and Mr Gilligan's English trial was technically adjourned.
Last October, the House of Lords rejected Mr Gilligan's appeal against his return to Ireland, but the writ of habeas corpus means he cannot be returned for trial in Ireland until that matter is resolved.
If the divisional court rules against Mr Gilligan, he could take his appeal to the Appeal Court and to the House of Lords, which could extend his detention at Belmarsh prison in south London for several years.
Expressing his frustration with the delay in proceeding, Judge Rucker said he was "fed up" and he admitted he was "surprised" that Mr Gilligan had been granted permission to launch a fresh challenge, on a writ of habeas corpus, against his return to Ireland.
Judge Rucker said the proceedings were being conducted in "a sort of time warp . . . Now the House of Lords has given judgment on the extradition proceedings, I would have thought Mr Gilligan would be on his way back to the Republic of Ireland on matters which completely subsume the English trial."
Challenging the extension of custody time limits, Mr Colin Nicholls QC, for Mr Gilligan, said his client wanted to be tried on the English charges and he criticised the Crown for failing to establish its position on the future of the English trial.
If Customs and Excise did not wish to proceed with the English trial, it should offer no evidence, Mr Nicholls told the court, but clearly the time had come for the prosecution "to bite the bullet and make up its mind what is to be done".
Mr Nicholls said it was not Mr Gilligan's fault that there were so many delays in the case. "It is not to be held to be his fault that he is exercising his rights and pursuing remedies he believes are available to him."