The case stems from the May 2002 arrest of Jose Padilla on suspicion of plotting with al-Qaida to detonate a so-called "dirty bomb." A dirty bomb makes use of conventional explosives to spread radioactive materials.

In June 2002 President Bush declared Mr. Padilla to be an "enemy combatant" which means, essentially, that he can be held indefinitely without access to the courts or legal representation.

He has been held without being formally charged in a federal jail in South Carolina since shortly after his arrest. But the appeal took place in New York because Mr. Padilla was arrested in connection with the September 11, 2001 terrorist attack on the city.

A team of civil rights lawyers arguing on behalf of Mr. Padilla says his detention is unconstitutional. Attorney Donna Lieberman is head of the New York office of the American Civil Liberties Union. "Nobody is saying that if Padilla is suspected of terrorist activities he should not be accused, tried and locked up if he is convicted. But the government is not even accusing him. The government is not even giving him a lawyer. He does not even have a trial date. He is in never-never land," she said.

But the government says that as an "enemy combatant," Mr. Padilla has forfeited his constitutional rights. Deputy Solicitor General Paul Clement argued that a congressional resolution authorizing the President to take all steps necessary to fight terrorism gave Mr. Bush the right to label Mr. Padilla "an enemy combatant."

A district court judge has already ruled that Mr. Padilla is entitled to legal counsel and to challenge his designation as an enemy combatant. The government has asked the appeals court to overturn that ruling, saying interruption of his interrogation would undermine the war on terrorism.