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In this courtroom sketch, Omar Khadr, far left, sits beside three lawyers at the military commission at Guantanamo U.S. Naval Base on Monday. ((Janet Hamlin/Associated Press))

An American military judge abruptly dropped all charges on Monday against Omar Khadr, although it's unlikely to mean freedom for the only Canadian at the U.S. Guantanamo Bay prison in Cuba.

The 20-year-old from the Toronto area, who had been facing charges of murder and terrorism, appeared before amilitary commission in Guantanamo, where he was expected to be arraigned.

Instead, the judge, army Col. Peter Brownback, dismissed the charges for technical reasons.

"We're very happy about it," Khadr's sister, Zaynab, told CBC News in Toronto. "We're surprised."

Under the Military Commissions Act that wasrevised and passed by the U.S. Congress in October 2006, military commissions only have jurisdiction to try "unlawful enemy combatants." However, Khadr was classified by a military panel in 2004as only an"enemy combatant" — which is what led the judge to dismiss the charges on Monday.

CBC News's Bill Gillespie, reporting from Guantanamo, said Khadr's classification as an enemy combatant means he was fighting on the battlefield, but not necessarily acting unlawfully.

Khadr was 15 when he was captured in Afghanistan in 2002 and imprisoned in Guantanamo. He was accused of throwing a grenade that killed American medic Sgt. First Class Christopher J. Speer.

The U.S. Defence Department said Monday that there would be an appeal of the judge's decision within 72 hours. Khadr will either be re-arraigned or willhave his status reviewed by a military tribunal, the Pentagon said.

"There are more questions than answers at this point," Cmdr. J.D. Gordon, a spokesman forthe Pentagon,told CBC News.

Gordon said Khadrwill not be returning to Canada any time soon, but Khadr's sister said she is still holding out hope her brother will be released.

"I don't know what to expect, I'm just hoping better news comes along soon," she said. "I hope my brother can come home."

She said she hasn't been allowed to speak to her brother since March, but knows he's coping with injuries to his eyes and knees, as well as mental anguish from being imprisoned for so long, at such a young age. Khadr was shot during his arrest.

"I'm hoping he's hanging in there," Zaynab said."I know his health isn't very good."

WhenKhadr appeared in court on Monday, he seemed defiant at first, Gillespie reported, noting that Khadr refused to stand when the judge entered the court. However, after the ruling was handed down, Khadr appeared more chatty and relaxed.

Khadr was wearing a prison uniform and sporting a full, bushy beard. Gillespie noted he looked much older than he did when he last appeared before the commission more than a year ago, wearinga Rootssweatshirt, his beard neatly trimmed.

Time for Ottawa to intervene: Amnesty

Alex Neve, the secretary general of Amnesty International Canada,said the Canadian government should act swiftly, and demand the U.S. return Khadr to Canada. Neve said Khadr could be tried under the Canadian court system, provided there was appropriate evidence to justify charges.

"It's certainly vital that the Canadian government intervene forcefully now,"he told CBC News. "It's been a very dismal reaction to date from the Canadian government on this case."

Neve also pointed out thatOttawa can no longer justify inaction by arguing that thecase is beforea U.S. court and can't be meddled with.

"They should be intervening directly with U.S. officials because it is now back in the hands of the U.S. government to decide what to do with this case,"Neve said.

Canada's Foreign Affairs Department would not comment on Khadr's case on Monday, but said it is reviewing the situation.

Ruling could jeopardize Guantanamo trial system

Col. Dwight Sullivan, thechief of U.S. defencelawyers at Guantanamo, saidMonday's ruling could jeopardize the revised military commission system set up byCongress andU.S. President George W. Bush.

The revisions cameafter the U.S. Supreme Court ruled in June 2006 thatthe previous Guantanamo trial system was illegal.

None of the roughly 380 detainees at Guantanamo have been classified as "unlawful" enemy combatants.

"The experience of the military commission system demonstrates that it's a failure," Sullivan told CBC News. "Rather than trying to revive these charges, it seems time for the United States to take a new look and find a new way to deal with these cases."

He suggested using the U.S. federal court system would be a preferable alternative.

Khadr is one of only three Guantanamo prisoners who faced charges under the new system.

David Hicks pleaded guilty in March to providing material support to al-Qaeda. He was released from Guantanamoand is serving out his nine-month sentence in his native Australia.

Salim Ahmed Hamdan of Yemen is currently having his case heard in Guantanamo. Hamdan, charged with conspiring to harm U.S. citizens, has admitted to being a driver for al-Qaeda leader Osama bin Laden but denied taking part in the Sept. 11, 2001, attacks against the United States.

The prisoners who haven't been charged are being held at the U.S. naval prison on suspicion of having links to the Taliban and al-Qaeda.

With files from the Associated Press