London's High Court on Monday rejected a claim by campaigners that Britain's multi-billion-pound arms sales to Saudi Arabia should be halted because they were being used in Yemen in violation of international humanitarian law.
The ruling was condemned by activist groups and charities, with Oxfam saying it "sets back arms control 25 years".
The Campaign Against Arms Trade (CAAT) had sought an order to block export licences for British-made bombs, fighter jets and other munitions which it said the Saudi-led Arab coalition was using in a campaign against Iranian-backed Houthis in Yemen's civil war.
An annual report by U.N. experts who monitor sanctions and the conflict in Yemen, seen by Reuters in January, said the Saudi-led coalition acting in support of the Yemeni government had carried out attacks that "may amount to war crimes", accusations that Riyadh rejects.
Yemen's civil war started in 2015, pitting the exiled government of President Abd-Rabbu Mansour Hadi, backed by the Saudi-led coalition, against the Iran-aligned Houthi group which controls most of northern Yemen, including the capital Sanaa.
The United Nations has put the civilian death toll in the conflict at about 10,000 killed and 40,000 wounded as result of actions by all sides.
More than 100 people were killed last October when coalition planes bombed a funeral reception in Sanaa. Hospitals, port facilities and other infrastructure have also been hit.
CAAT had argued that the government's decision to allow arms exports to continue to Saudi Arabia, a major customer for British defence companies and an important British ally in countering terrorism, was unlawful.
"The claimant's claim for judicial review is dismissed," the High Court judgement said.
The court, which heard much of the government's case in hearings closed to the media and public, said there had been extensive political and military engagement with Saudi Arabia regarding the conduct of operations in Yemen and the Saudis had "sought positively to address concerns about International Humanitarian Law".
"Saudi Arabia has been, and remains, genuinely committed to compliance with International Humanitarian Law; and there was no 'real risk' that there might be 'serious violations' of International Humanitarian Law (in its various manifestations) such that UK arm sales to Saudi Arabia should be suspended or cancelled," the court said.
The court also said the British government had access to "a wider and qualitatively more sophisticated range of information than that available to the claimant's sources", although campaigners said the evidence they had gathered should be taken seriously.
"The suggestion that human rights researchers were rarely or never on the ground in Yemen, or relied on 'second-hand information,'...is not true," Human Rights Watch said in a statement.
CAAT said it would appeal against the decision.
"This is a very disappointing verdict," Andrew Smith of CAAT said in a statement.
"If this verdict is upheld then it will be seen as a green light for government to continue arming and supporting brutal dictatorships and human rights abusers like Saudi Arabia that have shown a blatant disregard for international humanitarian law."