A firm of human rights lawyers that spent a decade pursuing British troops through the courts is to close at the end of the month after being stripped of public money.

Public Interest Lawyers, headed by Phil Shiner, was accused of making false allegations against British soldiers and has now had its contract to undertake state-funded cases withdrawn. The Legal Aid Agency said it was “clear that breaches with [the firm’s] contract are proven and warrant investigation”.

Nearly 200 complaints by suspected Iraqi insurgents against British troops will be thrown out, while Mr Shiner also faces claims he accepted illegal payments for cases brought against servicemen. He denies the accusations.

The Times claims to have seen correspondence to an Iraqi client in which the firm confirmed it could not act on the client’s behalf because it was closing on 31 August.

“Unless you can instruct another law firm, your private law claim for compensation will not proceed and you will not receive any financial award for personal injury,” it added.

Mr Shiner became known as the “scourge of the army” for his actions, and his firm was condemned by former Prime Minister David Cameron and the Ministry of Defence.

A five-year inquiry ruled in 2014 that the firm’s clients made claims that were “wholly without foundation and entirely the product of deliberate lies, reckless speculation and ingrained hostility”.

Speaking on the firm’s closure, Defence Secretary Michael Fallon said: “This is the right outcome for our armed forces, who show bravery and dedication in difficult circumstances. For too long, we’ve seen our legal system abused to impugn them falsely. We are now seeing progress and we will be announcing further measures to stamp out this practice.”

British veterans are now considering suing Mr Shiner after being dragged through the courts by his firm.

Sergeant Jeremy Edgar told the Mail: “Phil Shiner has fallen on his sword. How many servicemen and women have suffered due to the stress and misery that he has caused? This is ten years too late but it is fantastic news.”

He added that the stress of having to give evidence “cost me my marriage, job”.

“This closure is a warning for those others that are currently pursuing spurious and knowingly false claims against loyal British servicemen and veterans,” he added.

“They have attempted to tarnish not only Britain’s armed services but the UK as a nation.”