Despite his latest defeat at the Supreme Court of Canada, however, Schreiber will stay in the country for a public inquiry into his business dealings with former prime minister Brian Mulroney.

The high court, in a ruling released without comment Thursday, refused to review earlier judicial verdicts that cleared the way for extradition of the German-Canadian lobbyist and arms dealer.

His lawyer, Edward Greenspan, argued unsuccessfully that Justice Minister Rob Nicholson ought to refuse to surrender Schreiber to German authorities because they planned to introduce confidential tax records from Switzerland that should be barred from use at his trial under international law.

Earlier this week, Nicholson sent a letter to Greenspan rejecting any claim that he had the authority to delay extradition indefinitely.

The minister agreed, however, that Schreiber could remain in Canada until he testifies at the public inquiry promised by Prime Minister Stephen Harper.

In a statement issued Thursday, Nicholson said the course he's adopted will ensure "the public interest is served as Canadians will have the benefit of hearing Mr. Schreiber's testimony on Canadian soil."

Nicholson was non-committal on the subject of whether Schreiber should be free on bail during his continued stay in Canada. That is a matter for the courts and federal lawyers will address the issue "in the normal course," said the minister.

Schreiber says he paid Mulroney $300,000 to lobby the Canadian government on behalf of a project to build German-designed, light-armoured vehicles in Canada for export.

He says the deal was struck just before Mulroney stepped down as prime minister in 1993, although the actual lobbying was to be done after he returned to private life.

Mulroney says the cash total was $225,000 and the lobbying was aimed at international leaders - not at Canadian politicians or officials, which could have put him in violation of federal ethical rules.

The House of Commons ethics committee has already conducted three months of hearings on the Mulroney-Schreiber affair, but has been unable to resolve key discrepancies in the story.

Opposition MPs have called on Harper to launch a wide-ranging public inquiry immediately, while Conservative members of the panel argue the exact scope of the inquiry can only be decided after the committee issues a final report.

That report likely won't be ready until the end of March at the earliest.

David Johnston, the president of the University of Waterloo, has taken a preliminary look at the affair at Harper's request and has recommended a relatively narrow inquiry, essentially dealing with the light-armoured vehicle project.

Opposition MPs say the probe should include an earlier deal in which Air Canada purchased European-made Airbus jets while Mulroney was still in power.

Mulroney sued for libel and won a $2.1-million settlement from the previous Liberal government in 1996 after the RCMP alleged he was part of a kickback ring in the Airbus transaction.

He didn't disclose details of his dealings with Schreiber at the time, and critics say the inquiry should examine whether Mulroney ought to repay the settlement.

Schreiber has been free on bail for most of the last eight years while fighting extradition. But under terms of the latest bail order he had to turn himself in and spend Wednesday night in jail in anticipation of the Supreme Court ruling.

Greenspan has said he will be going back to court to ask for his client to be set free again.