SYDNEY » A former inmate at the U.S. military prison at Guantanamo Bay has dropped a lawsuit against the Australian government that accused it of complicity in torture that he allegedly suffered at the hands of his captors.

Mamdouh Habib agreed on an out-of-court settlement with the government for an undisclosed sum, both parties said Saturday.

Habib, an Australian citizen, was arrested in Pakistan in late 2001 and held for three years without charge before being returned to Australia in 2005.

An Egyptian-born Muslim immigrant, Habib was held in Pakistan for 28 days after his arrest and interrogated by Americans. He was transferred to Egypt, then six months later to the U.S. military base at Bagram, Afghanistan, and then to the U.S. prison for terrorism suspects at Guantanamo Bay, Cuba.

Habib has alleged he was been beaten and electrocuted by his captors while he was in Pakistan and Egypt, kept drugged and shackled, had his fingers broken, and was sexually molested. He claimed Australian officials were present during parts of his ordeal.

He sued the Australian government for what he claimed was its failure to uphold his rights as a citizen during his detention.

But the case was withdrawn after a settlement was reached in mid-December that absolves the Australian government of any responsibility for mistreatment Habib alleges he suffered. Other details were not released.

"In reaching this settlement, the government acted in the best interests of the commonwealth to avoid further protracted litigation and to enable our agencies to focus on their core responsibilities of protecting our national security," Attorney-General Robert McClelland’s office said in a statement.

Prime Minister Julia Gillard said the details of the settlement were confidential. At a news conference Saturday, she dodged a reporter’s question about whether the settlement included apologizing to Habib.

"Clearly, this is a matter that has been a long time in the making and … it wasn’t in our interests to have a long and protracted litigation," Gillard said. "It was in the interests of taxpayers to bring this matter to an end."

Habib told Australian media he had settled the case, but would not go into details. Habib has launched a separate legal bid to try to overturn a government ban on him holding a passport.