In once-secret reports seen by the newspaper, the Canadian Security Intelligence Service was denied permission last year to wiretap communications by 10 suspected Canadian terrorists working overseas.

Justice Edmond Blanchard ruled he lacked jurisdiction to endorse foreign spying operations by CSIS, although he granted the agency rights to domestic wiretaps on the suspects.

Sen. Colin Kenny, the chairman of the Senate's Committee on National Security and Defense, told the newspaper laws needed changing.

"It's clearly a problem for Parliament to solve," Kenny told The Globe and Mail. "I think it's hugely urgent."

In an e-mail response to the newspaper, U.S. counter-terrorism expert Professor Robert Chesney of Wake Forest University said U.S. agencies can spy on U.S. citizens abroad, under certain circumstances.