WASHINGTON (CNN) -- The U.S. Supreme Court has granted the Obama administration's request to dismiss the appeal of an accused enemy combatant held on U.S. soil.
Ali Saleh Kahlah al-Marri was a student at Bradley University in Illinois when he was arrested in 2001.
The decision "to dismiss the appeal as moot" came in a brief order from the nine justices Friday.
Ali Saleh Kahlah al-Marri has been in military custody since 2003, and was challenging the president's unilateral authority to detain him indefinitely and without charges. The court's order is a defeat for him on the larger constitutional issue.
But the Qatari man was indicted last week on federal conspiracy charges, and President Obama wanted him transferred to civilian custody immediately and to have the pending high court case thrown out.
No explanation was given by the high court, which had the option of going ahead with oral arguments as scheduled in late April.
The ruling means the larger constitutional issue of the president's power to detain alleged terrorists and other criminals in the United States will remain unresolved.
The justices also approved the transfer of al-Marri from military to civilian custody. There was no immediate indication when that transfer would occur.
The decision by the Obama administration to criminally charge al-Marri after he spent seven years in custody -- more than five years in virtual isolation in a Navy brig in North Charleston, South Carolina -- is the latest twist in the ongoing legal saga of the only remaining "enemy combatant" held in the United States.
He had been accused of being an al Qaeda "sleeper agent," but until this indictment had never been charged with a criminal or terrorism-related offense.
The 43-year-old man will be sent at some point to Peoria, Illinois, to face a criminal trial.
Obama last month ordered a prompt and thorough review of the "factual and legal basis" for the continued detention of al-Marri.
He subsequently issued a presidential memorandum ordering Secretary of Defense Robert Gates to facilitate al-Marri's transfer, calling it "in the interest of the United States."
Since his initial arrest on credit card fraud charges in December 2001, al-Marri -- a legal resident of the United States -- has remained in "virtual isolation in the brig," his attorneys said. They were suing the government to improve his jail conditions and are challenging the constitutionality of his detention.
They said his cell, at the U.S. Consolidated Navy Brig in South Carolina, is only 9 feet by 6 feet, and until recently, al-Marri was allowed little contact with the outside world, including his family.
Military officials deny any mistreatment.
Al-Marri's lawyer expressed some disappointment with the decision.
"While we would have preferred a Supreme Court ruling that U.S. citizens and lawful residents detained in the U.S. cannot be held in military custody as 'enemy combatants' without charges or trial, the Supreme Court nonetheless took an important step today by vacating a lower court decision that had upheld the Bush administration's authority to designate al-Marri as an 'enemy combatant,' " said Jonathan Hafetz, an American Civil Liberties Union attorney.
"We trust that the Obama administration will not repeat the abuses of the Bush administration, having now chosen to prosecute Mr. al-Marri in federal court rather than defend the Bush administration's actions in this case."
The case posed a sticky legal dilemma for the high court and the current and previous administrations.
President Bush ordered al-Marri confined in military custody, and his Justice Department had been filing the appeals opposing his legal claims.
At issue was whether the Authorization for Use of Military Force -- passed by Congress after the September 11, 2001, attacks -- gave the president the power to order the indefinite military detention of an accused terrorist seized on domestic soil.
Al-Marri arrived in the United States the day before the 2001 terrorist attacks, as a computer science graduate student at Bradley University in Peoria. He had earned an undergraduate degree there a decade earlier.
Weeks later, he was arrested after authorities found in his home hundreds of credit card numbers belonging to others.
But at an early court hearing, a prosecutor said al-Marri was believed to be an associate of al Qaeda, the Islamic terrorist group responsible for the 9/11 attacks. The case against al-Marri escalated when investigators further examined his computer and interrogated al Qaeda detainees, the government claims.
Although al-Marri was never charged with terrorism-related offenses, Bush in June 2003 issued a formal declaration naming him an "enemy combatant" and transferring him to military custody. That move sent him out of the normal criminal justice system into indefinite military detention.
The declaration alleges al-Marri engaged in "hostile and warlike acts" working as an "al Qaeda sleeper agent" who was planning to "hack into the computer systems of U.S. banks," for a possible follow-up to the 9/11 attacks.
The Pentagon says he had trained at a terror camp in Afghanistan, met al Qaeda leaders Osama bin Laden and Khalid Sheikh Mohammed, and "volunteered for a martyr mission," according to the government's filing with the high court.
The Supreme Court case is al-Marri v. Spagone (08-368).