Soldiers from the SAS have threatened legal action over Labour's Troubles Bill.
A letter by the Special Air Service Regimental Association, representing serving and former special forces troops, was sent to Northern Ireland Secretary Hilary Benn to warn the legislation does not provide adequate safeguards for veterans.
Labour withdrew plans to introduce the Legacy Act by the previous Conservative Government, which would grant immunity to Northern Ireland veterans.
New plans include a commission set up to investigate Troubles-related killings.
Critics have warned that it would expose veterans to "vexatious" legal claims and potentially see elderly former soldiers brought through the courts.
A former paratrooper in his 70s and known as Soldier F was cleared last month of murdering civilians on Bloody Sunday after a judge found the evidence against him fell "well short".
The letter by the association, which was drafted by London legal firm Sidley Austin, said its "clients" were gearing up to "challenge" the Government over the bill, the Telegraph reported.
It further warned its clients' "current position is that if the bill is enacted in anything like its current state, it will be subject to challenge".
Northern Ireland Secretary Hilary Benn has been sent the letter
| PAUnder its new plan, the Government has insisted that veterans have six key protections, including anonymity and ensuring no veteran is forced to travel to Northern Ireland to give evidence.
New rules have also been added which allows inquests to occur into the deaths of hundreds of British soldiers killed during the conflict.
Critics say the shift could pave the way for former IRA members to "rewrite history" by changing historic versions of events to align with their "narrative".
The association said the bill was “manifestly deficient in the protections it offers to former service personnel, police officers, and members of the security services”.
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Veterans who served in the British Army during the Northern Ireland troubles took part in a protest
| PA"Repeated reassurances have been given by the Government that veterans be supplied with specific protections in law to mitigate the effect of the repeal of the conditional immunities provided by the Legacy Act… [but] in fact, the bill contains almost no protection beyond those which already exist in law," the letter stated.
Shadow Armed Forces Minister Mark Francois said: "Call me old-fashioned but the SAS traditionally protect the Government, rather than trying to sue them".
"After the recent letter from the ‘nine senior generals’ – calling Labour’s legacy plans ‘a direct threat to national security’ this further action, by the SAS Regimental Association, shows just how angry veterans and particularly former special forces soldiers are, about Hilary Benn’s extremely dangerous proposals," he sad.
"Perhaps this will be a case of Who Sues Wins?”
Nine of Britain's top retired military chiefs launched an attack against the Prime Minister last week.
They said special forces troops were quitting out of fear they could be taken into court decades down the line for missions they carried out on behalf of the Government.
Tory MP Sir David Davis, a former SAS reservist, commented on the claims during Prime Minister's Questions on Wednesday, saying: "The most acute damage is being felt by the Special Air Service; it is already affecting their recruitment, retention, morale, and operational effectiveness".
He added that as a result, lawyers acting for the association "have sent a letter before action" to the Northern Ireland secretary.
Labour's bill passed to the next stage.
A vote on Tuesday saw 320 MPs in favour and 105 against.
Mr Benn told MPs: "I don't agree with that assessment" after being asked about the claims the bill was a national security threat.
He said there was "nothing in this bill that can be described as a direct threat to national security".
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