Mohamed Harkat has lost his legal challenge againat a security certificate issued against him. (Chris Wattie/Reuters)

Mohamed Harkat will appeal a Federal Court ruling Thursday that there are reasonable grounds to believe he remains a threat to national security, the Ottawa resident's lawyers say.

Harkat, who was born in Algeria, has been living under virtual house arrest since 2002 under a security certificate.

Thursday's ruling by Justice Simon Noel opens the door for the deportation of Harkat, who was arrested after Canada's spy agency, CSIS, alleged he was a sleeper agent for al-Qaeda.

The 42-year-old former pizza delivery man and gas station attendant has maintained his innocence, saying he fled his native Algeria and worked as an aid worker in Pakistan before coming to Canada in 1995 as a refugee using a fake Saudi passport.

He has been living in Ottawa with his wife, Sophie.

Harkat is reportedly devastated and in shock after the decision, his lawyers said. His supporters said they were planning a rally at the Canadian Tribute to Human Rights monument in Ottawa at 5 p.m. ET.

Noel said Harkat's links to the Ibn Khattab terror group — for whom he operated a guesthouse while in Pakistan — and his association with Islamic extremists provided reasonable grounds to believe he engaged in terrorism activities. Noel also said Harkat was "not truthful, honest or transparent."

"The court concludes that, while in Canada, Mohamed Harkat maintained contacts and assisted Islamist extremists, and used some methodologies typical of a 'sleeper agent,'" he said in a written ruling.

Held without trial

Harkat's trial had many twists and turns over the past eight years.

He was released on bail in 2006 after being held without trial under a national security certificate. A second certificate was issued against him in 2008.

He won a partial victory last year when Noel loosened the restrictions on his house arrest, though he still had to wear a GPS monitor, report in weekly to authorities and travel unsupervised only in the Ottawa area. His passport also remained in trust with federal agents.

A separate decision also upholds the constitutionality of the national security certificate system the government is using to remove Harkat from Canada.

Security certificates allow the Canadian government to detain and deport permanent residents or foreign nationals considered to be a security threat without revealing all the evidence to the accused.