Meanwhile, a federal appeals court sent an Islamic charity's lawsuit over alleged illegal wiretapping by federal investigators back to the lower court, stating that the plaintiffs could not bring to court a key piece of evidence which the government claims is protected as a state secret.
On Thursday the Senate Judiciary Committee reported out its rewrite of the Foreign Intelligence Surveillance Act (FISA) bill without a provision granting immunity to the telecoms.
Committee Chairman Sen. Patrick Leahy, D-Vt., said granting immunity would give the Bush administration a "blank check."
"When we give the government sweeping surveillance powers, there need to be clear rules and checks and balances to prevent abuses against the American people," Leahy said.
"While I appreciate the problems facing the telecommunications companies, the retroactive immunity issue to me is not about fixing blame on the companies but about holding government accountable. Passing a law to whitewash the administration's undermining of another law would be a disservice to the American people and to the rule of law."
A voice-vote of committee members on Friday upheld the decision.
Sen. Arlen Specter of Pennsylvania, the panel's top Republican, said court cases may be the only way Congress can learn how far outside the law the administration has gone in eavesdropping.
When the full Senate takes up the bill, Specter is likely to offer a compromise that would shield the companies from financial ruin but allow lawsuits to go forward by having the federal government stand in for the companies at trial.
Critics have suggested, by making the administration a party to the lawsuits, that the government could then use "state secret" privileges to sink the lawsuits anyway. That has been a strategy in cases brought against the government by privacy advocates.
A write-up of the FISA bill passed down by the Senate Intelligence Committee did include a provision for immunity. It may be up to Senate Majority Leader Harry Reid, D-Nev., to decide which version to bring to the floor for a vote.
Senator Christopher Dodd, D-Conn., has promised to filibuster any version which includes immunity.
Democratic House Passes Bill Without Telecom Immunity
The House surveillance bill, or RESTORE Act (H.R. 3773), approved 227-189, was a rebuke to President Bush who, while stressing the urgency of passing the legislation to protect national security, has promised to veto any bill that does not also shield telecom companies from civil lawsuits.
About 40 civil suits have been filed alleging the companies broke wiretapping and privacy laws by monitoring phone calls and e-mails without permission from a secret court created 30 years ago for that purpose.
One such lawsuit was brought about after a whistleblower revealed the existence of a secret room at an AT&T switching station in San Francisco. Retired AT&T technician Mark Klein helped connect a device in 2003 that he says diverted and copied onto a government supercomputer every phone call, e-mail, and Internet site query made via AT&T lines.
Mr. Bush argues that such lawsuits could bankrupt the telecoms if they are found liable, reveal classified information, and discourage future cooperation with legal surveillance requests.
In a statement after the vote, the White House said, "This evening House Democrats passed legislation that would dangerously weaken our ability to protect the nation from foreign threats." It reiterated Bush's intention to veto the legislation in its current form.
House Judiciary Committee Chairman John Conyers, D- Mich., left the door open to an immunity deal but said the White House must first give Congress access to classified documents specifying what the companies did that requires legal immunity, which the administration has repeatedly refused to do.
He told reporters even that might not sway him.
"My own inclination is I'm less kindly directed toward those telephone companies," he said.
House Republicans favor immunity. "These companies deserve our thanks, not a flurry of harassing litigation," said Texas Rep. Lamar Smith, the Judiciary Committee's top Republican.
The House bill, while allowing unfettered telephone and e-mail surveillance of foreign intelligence targets, would require special authorization if the foreign targets are likely to be in contact with people inside the United States - a provision designed to safeguard Americans' privacy.
The special authorization is called a "blanket" or "umbrella" warrant and would let the government obtain a single order that authorizes the surveillance of multiple targets.
Republican critics say even blanket warrants would impede intelligence agents by slowing their ability to collect intelligence on terrorist suspects.
"This is all about lawyering up the process," said Rep. Pete Hoekstra, R-Mich., the top Republican on the House Intelligence Committee.
House Speaker Nancy Pelosi, D-Calif., said the bill balances security and civil rights.
"It defends Americans against terrorism and other threats, protects Americans' civil liberties and restores checks and balances," she said. "No president should have inherent authority to collect (intelligence) on Americans without doing it under the law."
It was the House's second attempt in recent weeks to pass an eavesdropping bill, and small changes made by Democrats since the first attempt held their party's slim House majority together. Last month, House Republicans used a procedural maneuver to force the withdrawal of a similar bill just before a vote.
The new bill tightens rules on the sharing of identifying information gleaned from electronic surveillance that involves Americans. It provides protections against "reverse targeting" - that is, using unfettered foreign surveillance to secretly monitor Americans. It increases the size of the secret court that oversees intelligence. It also prohibits future presidents from conducting electronic surveillance outside the procedures established by the 30-year-old Foreign Intelligence Surveillance Act.
This so-called exclusivity provision would undermine Mr. Bush's claim that Congress' approval of the use of military force after the terrorist attacks of Sept. 11, 2001, was all the approval he needed to bypass FISA and eavesdrop inside the United States without court approval.
The White House opposes the exclusivity provision, saying it encroaches on the president's constitutional powers.
Congress had passed a temporary surveillance measure last August, when the White House argued that national security was jeopardized if court warrants were required to eavesdrop, and there were rumors of an impending attack on Washington shortly before the vote which, critics say, prompted Congress to bend to the request.
But now Congress wants to strengthen the requirements for warrants in a permanent law, which the White House says does not go far enough.
Indeed, the Bush administration wants a permanent rewrite of FISA, contending that changes in telecommunications technology have made the 1978 law an obstacle to intelligence-gathering.
Current FISA law requires the government obtain court approval before conducting electronic surveillance on U.S. soil, even if the target is a foreign citizen in a foreign country. However, many purely international communications are now routed through fiber optics cables in the U.S.
The White House wants authority to monitor foreign communications with Americans without first getting court approval, as long as the American is not the intended target of surveillance.
Courts Cites "State Secrets" In Kicking Back Wiretapping Lawsuit
A federal appeals court dealt a near-fatal blow Friday to an Islamic charity's lawsuit over alleged illegal wiretapping by federal investigators, ruling the case can't go forward because a key piece of evidence is protected as a state secret.
The 9th U.S. Circuit Court of Appeals ruled unanimously that a top-secret call log obtained by lawyers for the Oregon-based U.S. arm of the Al-Haramain Islamic Foundation can't be used as evidence. Lawyers for the Bush administration had argued the government would be forced to reveal sensitive "state secrets" if the lawsuit were allowed to proceed.