Dec. 5 (Bloomberg) -- The U.S. Supreme Court agreed to hear arguments from an accused al-Qaeda operative being held without charges in a military brig, setting up an early test for the Obama administration’s terrorism policies.

The 4th U.S. Circuit Court of Appeals concluded that the president has the legal authority to hold Ali Saleh Kahlah al- Marri as an enemy combatant based on assertions that al-Qaeda leaders sent him to the U.S. on a terrorism mission. The Supreme Court today said it will hear al-Marri’s appeal of that ruling.

President-elect Barack Obama’s legal team now must decide whether to follow President George W. Bush’s lead and argue in favor of broad presidential power at the high court. The new administration could instead shift al-Marri to civilian custody for criminal prosecution or try to repatriate him to his native Qatar.

“They’ll have to decide fairly quickly whether they intend to defend the government’s position and the 4th Circuit’s decision,” said Stephen Vladeck, a professor who teaches national security law at American University in Washington.

Al-Marri is the only person now being held as an enemy combatant on U.S. soil. He was a legal U.S. resident when he was arrested in Illinois in December 2001 during the investigation of the Sept. 11 attacks.

Aftermath of Attacks

His appeal centers on the 2001 Authorization for Use of Military Force, enacted by Congress in the aftermath of the attacks. Al-Marri’s lawyers say the 4th Circuit misconstrued that law in a way that gives the president unprecedented authority to indefinitely detain people who are legally in the country, including American citizens.

“The 4th Circuit has cast a pall over the physical liberty of all persons in the United States,” his appeal argued.

The Bush administration says it has evidence that al-Marri trained at an al-Qaeda camp in Afghanistan, was introduced to Osama bin Laden by Sept. 11 mastermind Khalid Sheikh Mohammed and was sent to the U.S. to explore computer hacking methods to disrupt bank records and the financial system. The government also says al-Marri’s laptop contained technical information about cyanide and other poisonous chemicals.

A 5-4 majority on the 4th Circuit said the allegations, if true, were a sufficient basis for the president to detain al- Marri as an enemy combatant. A separate 5-4 majority said al- Marri hadn’t been given a sufficient opportunity at the trial court level to challenge that designation.

Sept. 11 Hijackers

The Bush administration urged the Supreme Court not to hear the appeal, arguing that al-Marri “falls within the heartland” of the congressional authorization and that his circumstances are “materially indistinguishable” from those of the Sept. 11 hijackers.

Al-Marri’s argument “is tantamount to saying that Congress did not intend for the AUMF to prevent another September 11,” U.S. Solicitor General Gregory Garreargued.

The Supreme Court has ruled against the Bush administration four times in terrorism cases, rejecting government claims of broad power to hold suspects with minimal judicial review. Most recently, the justices ruled that inmates being held at the U.S. military facility in Guantanamo Bay, Cuba, have constitutional rights and may seek release in federal court.

The newest case marks the first time since Sept. 11 that the Supreme Court has considered the president’s authority to detain legal U.S. residents for preventive purposes. Each of the previous cases involved men captured outside the country.

“It really will be a test case,” Vladeck said. “For all of the talk about Guantanamo, it’s the al-Marri case that has broader domestic implications.”

Obama Waiting

Obama national security spokeswoman Brooke Anderson said the transition team wouldn’t comment on the al-Marri case.

“President-elect Obama will make decisions about how to handle detainees as president when his full national security and legal teams are in place,” Anderson said in an e-mailed statement.

Under the court’s normal schedule, the government’s next brief in the case will be due about a month after Obama takes office. The justices will hear arguments, probably in March, and rule by July.

The Constitution Project, a group that urged the high court to take up the appeal, called on the incoming administration to either charge or release al-Marri.

“We hope that President-elect Obama will resoundingly reject the current administration’s breathtaking claim that the United States may hold a civilian in military detention indefinitely,” said Sharon Bradford Franklin, a lawyer with the group, which says it works for “consensus solutions” to tough legal issues.

Court Schedule

Authorities arrested al-Marri in Peoria, Illinois, as a material witness in the attacks. He was held in civilian custody until June 2003, when President George W. Bush declared him an enemy combatant and ordered him moved to military custody. Since then, al-Marri has been held without charges at a Navy brig in Charleston, South Carolina.

Al-Marri says he was denied any contact with his lawyers or family for the first 16 months of his military confinement and to date has been allowed only two phone calls with his family.

Separately, the court agreed to consider an appeal that will affect job-bias lawsuits under a federal disabilities law and potentially other statutes. The justices will review a federal appeals court ruling that set aside a $47,000 award to an employee of FBL Financial Group Inc. in an age-bias case.

The lower court said employee Jack Gross needed to show direct evidence that he was demoted because of his age.

The case is Al-Marri v. Pucciarelli, 08-368.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

Last Updated: December 5, 2008 14:40 EST