A suspect in the Yvonne Fletcher murder case was "reassured" more than a decade ago that he was not wanted in connection with the killing, according to his lawyer.
An investigation into the man, named in reports as Saleh Ibrahim Mabrouk, collapsed after key evidence was withheld from prosecutors on national security grounds.
Pc Fletcher, then 25, was shot as she policed a demonstration against Colonel Muammar Gaddafi outside the Libyan People's Bureau in St James's Square on April 17 1984.
Speaking to the Daily Telegraph, Mabrouk's barrister Stephen Kamlish said: "He (Mabrouk) got a letter from the Foreign Office saying: 'you are not a suspect'.
"I believe he received that in about 2002. It is a letter from a senior civil servant.
"He was reassured by the British state and then suddenly 18 months ago he is arrested."
Dr Mabrouk was said to have been alongside protesters in St James's Square that day and was deported in 1984, later becoming a minister in the Gaddafi administration.
He sought political asylum in the UK as civil war engulfed the north African nation in 2011, according to reports, and was arrested in 2015 for conspiracy to murder in connection with the constable's death.
On Tuesday, crucial evidence in his case was determined not to be fit for court, leading to Dr Mabrouk, who is in his 50s and reported to have a son and the wife in the UK, to be released from bail without charge.
Questions now hang over his future in the UK as the end of the 33-year hunt for Pc Fletcher's killers all but ended without resolution.
Asked if Dr Mabrouk would remain in the country, a Home Office spokeswoman said: "We do not comment on individual cases."
The decision to drop the investigation was decried as "absolutely horrendous" by a former colleague of the fallen officer, while her family said they were "deeply disappointed and frustrated" by the development.
Former Scotland Yard commissioner Lord Stevens said "fuller" answers will be wanted following the announcement the prosecution would not go ahead.
His calls were echoed by another former senior police officer, Sir Hugh Orde, who voiced concerns people would not be "comfortable" if the reason the probe capitulated remains shrouded in secrecy.
Lord Stevens said it was "very disappointing".
He added: "I suspect the public will probably want more of an answer as to why the prosecution hasn't proceeded, whether it's diplomatic immunity or something extremely secret.
"At the end of the day, one has to accept those decisions. That's what the police do, they put the evidence in front of prosecutors.
"I do think the public may well want a fuller explanation."
Former Metropolitan Police officer John Murray, who was with the constable when she was gunned down, told the Telegraph the decision was "absolutely horrendous" and "perverse".
In a statement, the family of Pc Fletcher said: "We are deeply disappointed and frustrated that a prosecution cannot proceed at this time.
"We had hoped that the latest turn of events would finally lead to some closure for the family."
It has not been disclosed what the nature of the material is or who barred its use in open court.