The Government is now expected to draw back from supporting a court action by two politicians against the Morris tribunal, which is investigating alleged Garda corruption in Co Donegal.

Any decision not to indemnify the action by the Labour TD Mr Brendan Howlin and Senator Jim Higgins of Fine Gael would run contrary to signals from the Government last month when the tribunal ordered the politicians to reveal their sources of confidential information.

However, legal fees could be avoided if Attorney General Mr Rory Brady applied a "public interest test" to decide if the politicians should pay for an action based on constitutional law. Sources suggest Mr Brady would be likely to find in favour of the politicians.

Mr Higgins said failure to receive indemnity would be a "serious setback". Mr Howlin said there was a "difficulty", but be believed it would be resolved.

Allegations the politicians raised with the Government in 2000 were instrumental in the setting up of the tribunal which is chaired by Mr Justice Frederick Morris.

It is understood the Cabinet will be advised not to indemnify the politicians when it discusses the issue next week. The Minister for Justice, Mr McDowell, is believed to have met the Minister for Finance, Mr McCreevy, yesterday to discuss legal advice. The Attorney General was also involved.

The advice is thought to say the Government should not challenge a tribunal set up by the Oireachtas, that such indemnity could raise problems in future tribunals. A Government spokeswoman rejected any suggestion that the case would be treated as a "party political" matter by the Cabinet.