The inquiry is concerned with the events following a fierce firefight on 14 May 2004 Allegations that British troops murdered Iraqis in the aftermath of an infamous 2004 battle were the result of a "conspiracy" to pervert the course of justice, the UK government has said.The Ministry of Defence told the Al-Sweady public inquiry claims that bodies were mutilated were also "dishonestly made" by witnesses.
Lawyers for the Iraqis withdrew the murder and mutilation claims in March.
The inquiry was set up in 2009 to examine claims of mistreatment.
It is due to report by the end of this year and to date has cost £22.7m. It has reviewed millions of documents and heard from more than 280 witnesses.
'Not honest mistakes'In closing statements to the inquiry, lawyers for the MoD said the allegations had caused "immense anxiety and distress" to the soldiers concerned.
After giving evidence last year, Mizal Karim Al-Sweady held up a photograph of his son Hamid "The untruthful allegations cannot be attributed to honest mistakes or misunderstandings," the MoD said.
"They are the product of a conspiracy between a number of the Iraqi core participants to pervert the course of justice."
The four-year inquiry has been examining the Battle of Danny Boy - named after a British checkpoint near the town of Majar al-Kabir in southern Iraq - during the Iraq war.
British troops were accused of unlawfully killing 20 or more Iraqis at the nearby Camp Abu Naj.
But Neil Garnham QC from Treasury Solicitors - which represented many of the British personnel involved in the inquiry - said that some Iraqi witnesses had resorted to "elaborate fabrication" to explain why they and others were on the battlefield in the first place.
He accused the witnesses of being motivated by the prospect of receiving compensation.
'Broken and helpless'Last month Public Interest Lawyers, acting for the Iraqi families and surviving detainees, said there was "insufficient evidence to support a finding of unlawful killing".
The inquiry is also examining claims that British troops mistreated nine detainees arrested after the battle.
Lawyers for the Iraqis told the inquiry that these outstanding allegations were "grave indeed".
Patrick O'Connor QC described them as: "Gross violations of the Geneva Conventions, inhuman and degrading treatment of wounded, broken and helpless young men, who were utterly at the mercy of their military handlers and interrogators."
The MoD has admitted that one detainee was grabbed and shaken, and that another may have been slapped.
It also concedes that the detainees should have been given a proper meal when they were first captured.
The inquiry was established after the MoD failed to prove that it had carried out a proper examination of the events of 14 May 2004.
Inquiry chairman Sir Thanye Forbes is expected to produce his report by the end of the year The MoD was condemned for a "lamentable" failure to disclose information, including complaints made by detainees to the Red Cross.
"None of this would have been necessary if they had acted responsibly and in the public interest years ago," Mr O'Connor added.
"The heavy cost of this inquiry is the heavy cost of their dereliction of legal, moral and professional duty."
The inquiry is named after one of the Iraqi men, 19-year-old Hamid al-Sweady, who was alleged to have been unlawfully killed while being held following the battle.
It has been hearing closing oral submissions from the inquiry's core participants.
