A UK government decision to create a marine park in the Indian Ocean has been upheld by the High Court.
The controversial reserve was set up around the UK-controlled Chagos Islands in 2010, with commercial fishing banned in areas.
Former residents said it would effectively bar them from returning because fishing was their livelihood. The islanders were evicted in the 1960s to make way for the US Air Force base on the largest island, Diego Garcia.
Sitting in the High Court in London, Lord Justice Richards and Mr Justice Mitting ruled the marine protected area (MPA) was "compatible with EU law". This latest challenge is part of the islanders' long-running legal battle for the right of return.
The marine park was created by British diplomat Colin Roberts in his role as commissioner for the British Indian Ocean Territory on the instructions of the then foreign secretary in April 2010. The move followed consultations with the US during which the Americans were assured the use of their base on Diego Garcia would not be adversely affected by the reserve.
Under cross-examination at the High Court, Mr Roberts denied that the marine park had been created for the "improper purpose" of keeping the Chagossians out, as the US wanted, and said it was for environmental and conservation purposes.
Lawyers for the islanders said a classified US government cable published by WikiLeaks, a website with a reputation for publishing sensitive material, supported their accusations. They said Mr Roberts was reported in the cable as telling US diplomats at the US embassy in London in May 2009 that the park would keep the Chagossians from resettling on the islands and mean "no human footprints" or "Man Fridays" in the territory.
Nigel Pleming QC, for the exiled islanders, asked Mr Roberts about the alleged "Man Fridays" comment and suggested to him that it was "a totemic phrase that offends". Talking generally, Mr Roberts said he "absolutely" agreed and would never have used the phrase in such circumstances, but he refused to answer specific questions about the authenticity and accuracy of the cable.
Initially, the judges ruled Mr Roberts should answer questions about the cable, and could not rely on a government policy of "neither confirming nor denying" allegations involving matters of national interest. But after further submissions on behalf of the foreign secretary, the judges ruled that the Diplomatic Privileges Act 1964 meant the alleged cable, or copies of it held by newspapers, were inadmissible in evidence.
Olivier Bancoult, a spokesman for Chagossian exiles, gave his reaction to BBC News, speaking from his home in Mauritius, where most of the islanders were taken after their deportation. "I am very disappointed that the judges did not consider the suffering of the Chagossian people," he said. "We don't understand how it is possible for foreigners - the Americans at the base - to live on the land of our birth while we natives are denied this right. It is one of the most shameful things for the British government to have done."
Mr Bancoult said he planned to launch an appeal against the judgement and to continue his campaign "to show the world that the British government has trampled on our rights".
A spokesman for the Foreign and Commonwealth Office (FCO) welcomed the ruling and its recognition that "officials had acted properly and that the consultation process was valid". In a statement, the FCO also said that the Foreign Secretary William Hague had previously said that the policy towards Britain's Indian Ocean territories would be reviewed.