High Court judge Duncan Ousely ruled there were "substantial grounds" for believing Lotfi Raissi would abscond if released from prison.
Prosecutors say Raissi, 27, trained at the same Arizona flying school as Hani Hanjour, the pilot suspected of crashing American Airlines flight 77 into the Pentagon. U.S. authorities have asked for his extradition - not on terrorism charges, but on two counts of falsifying an application for a U.S. pilot's license.
Raissi allegedly hid a 1993 theft conviction and failed to mention that he'd had a knee operation.
His lawyers took the bail petition to the High Court after Raissi was denied bail in a magistrate's court which is handling the initial extradition proceedings.
British prosecutor Brian Gibbins, acting on behalf of the U.S. government, said Raissi had been indicted by an Arizona grand jury on 11 more counts, including conspiracy to submit a false immigration claim. An extradition request on those charges has not yet been received by Britain, Gibbins said.
Ousely conceded the extradition charges were not serious in themselves, but said the case had "a terrorist background ... against which I must ask myself, if Mr. Raissi were granted bail, would he turn up?"
There were solid reasons to believe he would not, the judge said.
Gibbins said "a web of circumstantial evidence points to the involvement of Mr. Raissi in a terrorist conspiracy that culminated in the events of Sept. 11."
Prosecutors allege Raissi trained alongside Hanjour on at least one occasion, and say he introduced the hijacker to the manager of an apartment complex where Raissi lived.
Gibbins said prosecutors had linked Raissi to the al-Qaida terrorist network through Redouane Dahmani - an Algerian with whom Raissi shared an apartment and whose telephone number was found among the possessions of Amar Makhlulif. Makhlulif, also known as Abu Doha, is wanted by U.S. officials in connection with a plot of blow up Los Angeles airport. He is currently in a British prison awaiting extradition.
Raissi's lawyers say prosecutors have failed to produce evidence to back up many of their charges, such as the allegation that telephone records show regular contact between Raissi and Hanjour.
A video of Raissi and Hanjour together, cited by prosecutors at an earlier hearing, in fact shows a cousin of Raissi's, defense lawyer Helen Malcolm said.
Malcolm also disputed a prosecution claim that six months' worth of records were missing from Raissi's pilot's log book; the pages were in a copy of the book given to defense attorneys, she said.
U.S. prosecutors have said the counts against Raissi are "holding charges" and have suggested he may face a conspiracy-to-murder indictment. Gibbins said the ongoing investigation would in time produce more evidence linking Raissi to terrorist acts.
But Malolm said prosecutors were "clutching at straws."
"It's wearing thin, this excuse," she said. "Give us some evidence."
Ousely said there were problems with the prosecution case, but said it detailed "a sequence of coincidences that goes beyond coincidence."
"There is sufficient material deployed before me to show the terrorist background to this case cannot be dismissed," he added.
Raissi, who denies any involvement in terrorism, was arrested at his home near Heathrow Airport on Sept. 21 after a federal court in Arizona issued a warrant for his arrest. He is being held in London's high-security Belmarsh prison. His next court hearing is scheduled for Dec. 14.
©MMI The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed