The Privy Council yesterday approved the construction of a £20 million dam on the Upper Macal River in Belize which environmentalists claim will put lives at risk and destroy the habitats of some of Central America's most endangered species.

Conservationists said the dam site was composed largely of porous rock and the Privy Council found that maps submitted by Becol, a Belizean subsidiary of a Canadian energy conglomerate, Fortis Inc, in an environmental assessment report omitted a geological faultline.

The Privy Council, which is still the highest court of appeal for the tiny Caribbean nation, dismissed the case by a three-to-two majority. It said there was not sufficient evidence to show that the rock was unsuitable.

The judgment also contained a stinging criticism of the government of Belize which last year passed a law enabling Fortis, which will own the dam and sell electricity to Belize for 50 years, to bypass the normal construction formalities.

Richard Buxton, a solicitor for the Belize Alliance of Conservation Organisations, said: "It is a disappointment but the dissenting judgment is
remarkably powerful and vindicates bringing the claim.

"The integrity of the Belizean government was clearly called into question."

John Evans, Fortis's chief engineer, said the study was completed before it became involved and "was obviously done by someone who thought it was not significant".

He said: "I am happy that the court is siding with the project and I envisage that work will be completed by 2005."

Belize, which gained independence from Britain in 1981, buys most of its electricity from neighbouring Mexico.

The Army maintains a base near the Upper Macal River valley region, where work on the dam has already displaced rare species such as the Baird's tapir and the scarlet macaw.