David Cameron has defended plans for secret court proceedings, saying they would prevent taxpayer-funded payouts to "unsavoury" characters and enhance national security.
The government wants to see some civil cases heard in secret to avoid compensation being paid out because the evidence which would have to be heard breaches national security.
Under closed material proceedings (CMPs), evidence could be put forward without even the claimant being able to see it.
Cameron defended plans to introduce new secret court proceedings
Ministers argue it is needed to prevent the UK becoming a "global magnet" for people seeking taxpayer-funded settlements.
Mr Cameron said he had been persuaded of the need for action by having to take the decision to pay out "a lot of money" to some 16 terror suspects.
Former Guantanamo Bay detainee Binyam Mohamed was among those who received a multi-million pound payout after claiming they were mistreated by US and British security and intelligence officials.
The Prime Minister also told the Liaison Committee that there were implications for intelligence-sharing with allies if the government could not guarantee to keep it secret.
"We may be less safe here in this country," if those arrangements ceased," he warned.
Mr Cameron insisted, however, that he was not committing to accepting any particular changes, though changes would "properly address" the concerns raised by critics.
Binyam Mohamed received a multi-million payout after being incarcerated in Guantanamo Bay
Reprieve's Executive Director, Clare Algar is among those who oppose the changes. She said in a statement the government "has settled cases because there has been clear evidence they were mixed up in serious human rights abuses.
“The origins of this Bill clearly lie in a desire to avoid government embarrassment. If he really does have nothing to hide, why won't the Prime Minister list which cases it is that require such a dangerous departure from the proud British tradition of fair and equal justice?"
The move has also been savaged by an influential cross-party committee, other civil liberties campaigners, lawyers and the Liberal Democrat party conference.
On Tuesday David Cameron challenged senior MPs saying: "What would you do about the fact that we are having to pay out money, often to quite unsavoury people, who might have made totally bogus allegations against Britain and we have no method of hearing those cases in court?
"What we are prepared to do is say these closed material proceedings only apply in civil cases - would never apply in criminals cases, never apply in inquests - they'll only apply when the judge wants them to happen not on the order of the minister.
"There will be all those safeguards in place. We have a responsibility to sort this issue out and, in doing so, we have the backing of former Lord Chief Justice, former Lord Chancellors and many others in the system who recognise this is, as it were, regrettable but necessary.
"I have no great desire to introduce a system of secret justice; that is not what this is about. It is a very single problem we are trying to deal with in the most sensitive way possible."
Cameron ducked responding to whether that meant the government was committed to accepting a Lords amendment giving full judicial oversight on the use of CMPs.
"Ken Clarke has got a difficult enough job to do already without me trying to convince his former adviser that he's got it right," he said.
The Minister Without Portfolio is steering the Bill through Parliament.
Shami Chakrabarti has criticised the move
Liberty director Shami Chakrabarti also criticised the move saying: "Current law already protects national security and the government can't point to a single case of judges forcing the exposure of state secrets.
"Ministers, like moguls, sometimes settle claims to spare embarrassment - that's no excuse for tipping the scales of justice towards the powerful."
Peers comprehensively dismissed a bid to have the legislation thrown out altogether though - as had been called for in a vote by Lib Dem activists in September.
Deputy Prime Minister Nick Clegg has signalled he wants changes when the legislation is debated by MPs.
Changes inflicted by the Lords - by significant majorities - introduced more judicial discretion as well as significantly tightening the scope of the secret courts.
Committee member Andrew Tyrie, who also chairs an all-party group on rendition, said: "It was clear from the Prime Minister's evidence today that he has not yet had an opportunity to hear all the arguments on this.
"The House of Lords sent a strong and clear message that the Bill is not tolerable in its current form.
"The government must now accept the amendments proposed by the Lords and allow the judge to have the final say on whether CMPs should be used in a case and to ensure that CMPs are used only as a last resort."