Obedience to Strasbourg's Grand Chamber has led the House of Lords to correct itself: Secretary of State for the Home Department v AF  UKHL 28 (10 June 2009).
The result is that there is now a rule (not a discretion) at common law which is that it is never fair to base a decision "solely or to a decisive degree" on material that has not been disclosed to the party adversely affected.
Previously, the House of Lords had recognised that there might be some cases where decisions could fairly be based "solely or to a decisive degree" on closed material: Secretary of State for the Home Department v MB  1 AC 440. This was on the basis that in such cases the closed evidence was so compelling that the tribunal could safely conclude that no answer to it was possible. This was the "makes no difference" principle.
The Grand Chamber approached the absolute requirement of fairness differently in A v United Kingdom  ECHR 301 (noted here 22 February 2009). The rule laid down there is that sufficient information must be disclosed to enable the defendant to give effective instructions to meet the allegations.
Nine Law Lords considered the appeals in the present case, and the decision was unanimous. The House of Lords was obliged to follow the European Court of Human Rights. Lord Phillips delivered the leading opinion. Lord Hope noted (86) that there is a distinction between disclosing the allegations and disclosing their source (the former being required by the rule, not the latter), while recognising that details will often matter and that the system may be unsustainable. Lord Scott (95) said that Parliament could provide for procedures that overrode the right to a fair hearing, but he accepted that the reading down of the relevant statute (to make it subject to the requirements of fairness) was appropriate here. Lord Hoffmann wondered (74) about the limits of the idea that some guilty people might have to go free to protect the right to a fair hearing, and Lord Brown noted (121) that in some cases national security may have to give way to that right.
Lord Phillips said (64) that the best way to produce a fair hearing is to ensure the fullest disclosure. Whereas the earlier Strasbourg approach had been less stringent (Chalal v United Kingdom (1996) 23 EHHR 413, 131) was that the minimum requirement was "a substantial measure of procedural justice",
"65 ... The Grand Chamber has now [in A v United Kingdom] made clear that non-disclosure cannot go so far as to deny a party knowledge of the essence of the case against him, at least where he is at risk of consequences as severe as those normally imposed under a control order." [emphasis added]
But fairness in the context of control order proceedings (s 2 Prevention of Terrorism Act 2005[UK]) may not import the same requirements as fairness in the context of a criminal trial, as Lord Phillips pointed out in the following reference to R v Davis (noted here 19 June 2008):
"66. In A v United Kingdom the Strasbourg court has nonetheless recognised that, where the interests of national security are concerned in the context of combating terrorism, it may be acceptable not to disclose the source of evidence that founds the grounds of suspecting that a person has been involved in terrorism-related activities. In the light of this it should occasion no surprise that no counsel suggested that the decision of this House in R v Davis  UKHL 36;  1 AC 1128 in relation to witness anonymity in criminal trials should be applied in the context of control order proceedings." [emphasis added]
But it hardly seems likely that the nature of the proceedings can determine whether the "essence" of the case includes "the source" of the information.
Whatever the nature of the proceedings, it should be possible to say whether they are based "solely or to a decisive degree" on the information which the prosecution seeks to suppress. This is apparent from Lord Hoffmann's overview (71):
"The difference between the rule laid down by the ECtHR and what I had previously thought to be the law of England is that the Strasbourg court has imposed a rigid rule that the requirements of a fair hearing are never satisfied if the decision is "based solely or to a decisive degree" on closed material, whereas the view expressed by a majority of your Lordships' House in Secretary of State for the Home Department v MB  1 AC 440 was that even in such a case, substantial justice might still be possible. As I understand the views expressed by judges of the Special Immigration Appeals Commission since MB's case, it is not unusual for the Commission to base its decision "to a decisive degree" on closed material and nevertheless to be satisfied, from the nature of that material, that the applicant has had a fair hearing."