The terrorism trial of Canadian Omar Khadr should resume and be free of legal wrangling over his status at Guantanamo Bay, the U.S. government told a military appeals court Friday.

The U.S. administration wants Khadr, now 20, to face a military tribunal as soon as possible. This despite the fact that he hasn't been declared an "unlawful" enemy combatant -- as required by Congress under new rules written last year.

Retired Col. Francis Gilligan argued it's a technical matter. He said Khadr isn't entitled to protections offered to regular prisoners of war.

"It's very clear he's an al Qaeda fighter who was engaged in hostilities against the United States,'' Gilligan told the panel, assembled after Khadr's case was thrown out in June.

"There is no doubt as to his status."

U.S. military lawyers were appealing a ruling by a military judge who dismissed charges against Khadr, including murder.

Khadr was accused of killing U.S. Army Sgt. Christopher Speer with a grenade during a firefight in Afghanistan on July 27, 2002.

In 2004, a military panel classified him as an "enemy combatant." But because he wasn't classified as an "unlawful" enemy combatant -- required under rules written by Congress -- a military judge said last June that he had no choice but to throw the case out.

Defence lawyers say the "unlawful" designation is a critical element of guilt or innocence in what is a fundamentally flawed military tribunal system.

"This court was established on the fly," said Lt.-Cmdr. William Kuebler, who said that one of the judges questioned whether it was acceptable that he was appointed by a Defence Department deputy instead of Defence Secretary Robert Gates.

"More could not be at stake," Kuebler said outside a borrowed federal courtroom near the White House. "This is about the credibility of the United States."

The U.S. Court of Military Commission Review reserved judgment.

If the commission agrees with defence lawyers, the case might have to go back to square one while the government gets Khadr's designation changed.

The government could also appeal to a civilian court. But, in any event, it would mean another delay of several months.

American officials call the "unlawful" designation a mere technicality. Meanwhile, Khadr's lawyers are questioning the legitimacy of the new review panel.

"This is one step in what we anticipate to be a very long process,'' said Nathan Whitling, one of Khadr's Canadian lawyers.

"Congress created a brand new untested regime. The case could get completely derailed on who knows how many grounds.''

Khadr continues to be held at the U.S. prison camp in southeast Cuba and is the only Western prisoner left.

With files from The Canadian Press