This poster released in 2001 shows Anas Al-Liby, one of the FBI's 22 most wanted terrorists. File picture: FBI

New York - A foreign government is paying for the criminal defence of alleged senior al-Qaeda militant Anas al-Liby, his defence lawyer told a US judge on Wednesday.

Al-Liby, whose real name is Nazih al-Ragye, was captured in October in Libya by US forces and brought to the United States to face terrorism charges in connection with the deadly 1998 bombings of US embassies in Kenya and Tanzania.

It was not immediately clear whether the government is Libya, which condemned the seizure as an unauthorised operation within its borders. Al-Liby's lawyer, Bernard Kleinman, declined to disclose the identity of the governmental “entity” covering his fees during the court hearing in New York federal court.

Both the Washington Post and the New York Times have previously reported that Libya is paying Kleinman's fees, citing unnamed sources. No one could be reached for comment on Wednesday at the Libyan embassy in Washington.

US District Judge Lewis Kaplan said the payment arrangement created, at minimum, a “potential conflict of interest” for Kleinman, who Kaplan said might find his loyalties divided between his client and his employer. The judge scheduled a hearing for August to explore that issue.

Kleinman told Kaplan under questioning that he did not consult with the payer about how to handle Al-Liby's defence and that his only instruction was to represent Al-Liby throughout the case. He did not say how much he was paid.

Prosecutors first raised the issue in October but did not press it until earlier this month, when they requested a hearing before Kaplan to determine whether the fee arrangement created a conflict of interest.

A gaunt Al-Liby, who is suffering from undisclosed health problems, appeared in court via live video feed from a medical prison facility in North Carolina.

Prosecutors said they expect to transfer him back to New York within a couple of weeks, though Al-Liby at one point told the judge he believes he may require surgery soon.

Al-Liby's family has previously said he has hepatitis C, a liver disease. US interrogators aboard a Navy ship last autumn cut short their questioning of Al-Liby after his capture, citing in part his declining health.

In court papers filed last week, Kleinman said Al-Liby is “terminally ill”. A number of other filings in the case remain sealed, and Kaplan instructed Kleinman not to discuss his client's health in open court.

Al-Liby has pleaded not guilty to involvement in the bombings, which killed 224 people. His trial is scheduled for November, alongside two co-defendants, Egyptian Adel Bary and Saudi Khalid al-Fawwaz. - Reuters