Alleged IRA Hyde Park bomber goes free after 'no trial' guarantee
It may affect 186 people wanted for terror-related offences in the Troubles who received similar assurances.
Victims' families said they felt "devastatingly let down".
Police Service of Northern Ireland Chief Constable Matt Baggott said the PSNI accepted the court's decision and full responsibility for the failures which resulted in this outcome.
He said the matter would be referred to the Police Ombudsman for Northern Ireland.
"I wish to apologise to the families of the victims and survivors of the Hyde Park atrocity," he said.
"I deeply regret these failings which should not have happened. We are currently carrying out a check of these cases to ensure the accuracy of information processed by the PSNI."
'Extremely serious case' The public interest in making state officials keep their promises outweighed the public interest in a trial being held, Mr Justice Sweeney had ruled on 21 February.
The Crown Prosecution Service has now said it does not wish to appeal against the judge's ruling, allowing reporting of the case to go ahead.
Sue Hemming, head of special crime and counter terrorism at the CPS, said it "respected" the decision of the court.
"The legal issues in this extremely serious case were complex and it was appropriate that they should be fully argued before the court for a judge to rule upon," she said.
The Hyde Park attack killed Squadron Quartermaster Corporal Roy Bright, Lieutenant Anthony Daly, Trooper Simon Tipper and Lance Corporal Jeffrey Young on 20 July 1982.
Mr Downey, 62, who was convicted of IRA membership in the 1970s, had denied murdering the soldiers and conspiring to cause an explosion.
Official letter to John Downey in 2007There are no warrants in existence, nor are you wanted in Northern Ireland for arrest, questioning or charging by police. The Police Service of Northern Ireland are not aware of any interest in you by any other police force”
But over the course of legal argument, he asked the Old Bailey to halt the prosecution - saying he had received a clear written assurance from the government that he would not be tried.
He cited an official letter he had received in 2007 saying: "There are no warrants in existence, nor are you wanted in Northern Ireland for arrest, questioning or charging by police. The Police Service of Northern Ireland are not aware of any interest in you by any other police force."
He said his alleged offences had been categorised as one of the "on-the-run" cases that would no longer be pursued in the light of progress in the peace process.
In his judgement halting the case, Mr Justice Sweeney said Mr Downey had received an assurance in 2007 that he would not face criminal charges, despite the fact that police in Northern Ireland knew he was still wanted by Scotland Yard.
Although police soon realised they had made a mistake, the assurance was never withdrawn.
The Crown Prosecution Service had argued that the assurance was given in error - but the judge said it amounted to a "catastrophic failure" that misled the defendant. A trial would therefore be an abuse of executive power.
'Peace and hope' Responding to the decision, former Northern Ireland Secretary Peter Hain said: "I was astonished to hear that this prosecution had been launched in the first place, because he had received a letter from the Northern Ireland Office after painstaking investigations into whether the evidence still existed to prosecute him as a suspect for this crime and he received a letter saying he was in the clear.
"This was a critical part of the peace deal that has brought Northern Ireland from horror and evil to peace and hope and the idea that it could be unravelled in his case was astonishing to me."
Sinn Fein President Gerry Adams said Mr Downey's arrest had been in breach of the "on-the-runs" policy decided following the Good Friday Agreement.
"John Downey should never have been arrested and this has been vindicated by the court decision," Mr Adams said.
- Suspects of paramilitary offences during The Troubles
- Not covered by the original Good Friday Agreement
- UK government agreed in 2001 to give assurances that there would be no prosecutions of "OTRs" if organisations were supporting the peace process and on ceasefire - 187 received letters similar to John Downey's
- Sinn Fein submitted John Downey's name to government scheme
He said Mr Downey had been handed "a get out of jail free card" and urged an appeal against the decision.
"Every conceivable avenue should be exhausted. Justice should not have a sell-by date," he said.
'Terrible events' Families of those killed said in a joint statement that the judgement had left them feeling "great sadness and bitter disappointment".
The statement read: "This news has left us all feeling devastatingly let down, even more so when the monumental blunder behind this judgement lies at the feet of the Police Service of Northern Ireland.
The end result, it said, was that the "full chain of those terrible events" would never be put in the public domain for justice to be seen to be done.
They added: "With no sensible explanation from the PSNI [Police Service of Northern Ireland], this must surely now raise the question of whether there have been other errors in the issuing of other such letters.
"The families urge a thorough review of what remains of the administrative scheme to avoid a repeat of what has happened here."
The Hyde Park attack is one of the most significant unsolved IRA bombings of The Troubles. One other person was convicted in relation to the deaths before being later cleared on appeal.
The bomb that Mr Downey was accused of planting was the first of two that day in London and he was linked to the attack by fingerprints found on a parking ticket bought for the car used to transport the bomb.
In the second explosion, less than two hours later, seven Royal Green Jackets bandsmen in a Regent's Park bandstand were killed.