Peers have rejected a move that would enable the UK government to send asylum seekers offshore.
The Bill seeks to curb English Channel crossings and change how asylum claims are processed.
The House of Lords voted 208 to 155 to strip out the contentious provisions from legislation allowing overseas processing centres to be set up, similar to those used by Australia. Rwanda, Ghana and Albania have been touted as potential destinations. The plan would see the UK pay another country to take on the responsibility but no country has so far agreed to do so.
It was among a series of defeats inflicted by the upper chamber on the flagship Nationality and Borders Bill, setting the stage for a protracted round of parliamentary ping-pong, in which legislation passes between the unelected chamber and the Commons.
The measure to offshore asylum seekers drew cross-party criticism in the upper chamber.
Tory peer Baroness Stroud questioned how the policy would work in practice.
“How are we going to apply an operation that would be at the best of times excruciatingly complex to execute on a potentially huge scale?” she asked.
“And, of course, there is the irony of people seeking safety only to find themselves in a position of renewed vulnerability, potentially held indefinitely in detention abroad.
She called the proposal “deeply concerning” and “unworkable".
“The powers it would grant to our government are on the one hand ill-defined but on the other hand far-reaching, potentially hugely expensive and yet ineffective, exposing vulnerable people to further trauma rather than offering protection,” she said.
The Bishop of Durham, the Rt Rev Paul Butler, highlighted the “deep harm that offshoring would have on everyone”, particularly children.
Former EastEnders actor Lord Cashman branded the policy “entirely unacceptable”.
The Labour peer, who previously served as an MEP, said: “It will place vulnerable people at risk.”
Former master of the rolls and ex-head of civil justice Lord Etherton, an independent cross-bencher, said: “The principle of offshoring while an asylum seeker is having their claim assessed is wrong in principle, oppressive in practice and lacking, critically, sufficient safeguards under the bill.”
Labour front-bencher Lord Rosser suspected having asylum seekers “out of sight and out of mind” was a main motivation of the government.
Home Office minister Baroness Williams of Trafford said in response: “The fact discussions are ongoing means I can’t give any particulars on how the process would work, and indeed the costings, would pan out.
“Much of these matters are for the negotiation table.”
She said the policy would only be operationalised in accordance with our international obligations.
“We are committed to ensuring overseas asylum processing is both humane and safe, taking into circumstances which may mean that overseas processing is not appropriate for particular individuals,” she continued.
“But for far too long, we have allowed people smugglers to decide where and how people cross borders and claim asylum.
“These uncontrolled and unsafe routes have led to terrible tragedies off our shores.
Baroness Williams outlined the government's main aim as destroying the “business model” of human traffickers by reducing the demand for their services by making it easier to remove those who undertake dangerous journeys or otherwise “abuse” the asylum system.
“We are working to provide a fair and functioning system which provides protection to those in need while preventing abuse at the same time,” she added.
Earlier, in another government defeat, peers backed a move that would ensure the UK could not deny asylum to refugees who passed through a “safe” third country until it had formal return agreements in place.