The British government is to consider challenging the Sentence Review Commissioners' recommendation to free the UDA leader, Johnny Adair, from Maghaberry Prison.
In a statement yesterday, the Northern Ireland Office expressed surprise at the recommendation, which it said might not stand up to legal scrutiny. It defended the original decision by the Northern Secretary, Mr Peter Mandelson, to return Adair to jail last summer.
The finding of the Sentence Review Commissioners is only a preliminary view, and the government has seven days to appeal it. Adair, the UDA's Shankill commander, is believed to have been involved in the killing of at least a dozen Catholics during the 1990s.
Under the terms of the Belfast Agreement, he was granted early release from the Maze Prison on licence in September 1999 after serving five years of a 16-year sentence for directing terrorism.
Mr Mandelson decided that he had breached the terms of his licence, and he was returned to jail at the start of the loyalist feud in August. It is understood the Northern Secretary was acting on the advice of senior British army and RUC officers.
The Northern Ireland Office statement said: "The Secretary of State remains confident that his original position to return Adair to custody was correct and served the best interests of the community. He will be following developments closely. The matter will be the subject of an oral hearing after which we will consider what, if any, further action needs to be taken."
Mr John White, chairman of the Ulster Democratic Party, the UDA's political wing, said Adair should be freed immediately. He claimed Adair was committed to the peace process and the maintenance of the UDA ceasefire.
The deputy leader of the Alliance Party, Mr Seamus Close, described the commissioners' recommendation as crazy. "To make such a recommendation in a week in which people have been shot dead is unbelievable," he said.
"The community needs reassurance that law and order will be maintained, and I hope Peter Mandelson will challenge this decision. Tension needs to be reduced, not increased, on our streets."
The UK Unionist leader, Mr Robert McCartney, also condemned the move. It fully demonstrated all the inherent defects "in this concoction known as a peace process," he said.
It is understood that leading security figures will continue to oppose Adair's release. The loyalist feud, which has resulted in seven deaths, is nearing resolution, and senior army and RUC officers believe his return to the streets could set the process back.