The head of MI6, John Sawers, told the parliamentary panel his agency was previously unable to defend itself against such claims because of security concerns but that Britain's Justice and Security Act allows intelligence services to give evidence in such cases, The Daily Telegraph reported.
The courts have forced the British government to pay terror suspects 30 million pounds ($40.2 million) for the claims.
"In many of these cases we had a strong defense about these allegations that were being made against us, but the court system didn't allow us to make those defenses," Sawers said. "We were really glad to see the Justice and Security ct being passed earlier this year, which now enables the agencies to defend ourselves when faced with these allegations."
Sawers and other British intelligence chiefs faced questions from a parliamentary committee.
The hearing by the committee was called after documents released by former U.S. National Security Agency contractor Edward Snowden indicated the United States and Britain had established intelligence-gathering posts around the world and used sophisticated eavesdropping equipment to intercept the personal communications of top Western leaders and politicians.
The heads of Britain's three intelligence services – Sawers of MI6, Andrew Parker of MI5 and Government Communications Headquarters' Sir Iain Lobban -- appeared before the Intelligence and Security Committee in a 90-minute televised proceeding that had a 2-minute delay in case one of the officials inadvertently revealed a state secret, the BBC reported.
The committee's lack of open critique of the agencies drew derision from other members of Parliament and the public, The Guardian reported.
Lord Foulkes, a former member of the intelligence committee, charged the committee had been "inadequate" in its questioning of the intelligence directors because it included too many "stalwart pillars of the establishment."
Legal pressure group Reprieve slammed the hearing as a "damp squib" that demonstrated the committee's failure as a watchdog of the intelligence services. A squib is a small explosive.
The parent company of The Guardian, which has published a number of stories based on documents released by former NSA contractor Edward Snowden, said the session produced "no substantive discussion" of the documents.
While the agencies claim any disclosure damages their ability to work, "this cannot mean the end of all questioning and debate," the statement added.
The committee's comments offered little criticism of the agencies' alleged activities.
Committee member Mark Field said the committee had not been aware of the "intricacies" of the agencies' spying programs and requested a "comprehensive update" of their collaborations with foreign intelligence agencies during a closed session.
Asked by a committee member why the public had only found out about many of his agency's covert activities through newspaper stories, Lobban said some things were "necessarily secret." He added that secret did not mean sinister.
Lobban denied GCHQ was reading everyone's e-mail or listening to their calls, saying surveillance was limited to those considered a threat. If he asked his staff to spy on everyone, he said, "they'd leave the building."
Sawers told the committee Snowden's revelations had put MI6's operation "at risk," with al-Qaida "lapping it all up."
He defended the committee's oversight of the security services as "very rigorous."
None of the spy chiefs provided details during the public hearing of how they had been damaged.
While the Snowden leaks have raised questions in Britain about intelligence operations aimed at foreign leaders and ordinary citizens, there have been questions about the agencies for more than a decade. They reported weapons of mass destruction in Iraq that failed to materialize and then failed to predict the London transport bombings of 2005.