Anti-US demonstrators burn copies of the US flag near the US embassy in Manila, 02 January 2007, to protest against the transfer of US Marine Lance Corporal Daniel Smith, convicted of rape, from a Manila jail to the US embassy. Philippine international credibility was restored when Manila turned over Smith, despite unpopularity at home.

Philippine international credibility was restored when Manila turned over a US marine convicted of rape to the American embassy, despite popular uproar at home, a senior Filipino official said.

The transfer of Lance Corporal Daniel Smith from a Manila jail to the US embassy on Friday following his conviction for raping a young Filipina woman in November 2005, has sparked street protests in the capital.

However the Philippine Court of Appeals on Wednesday issued a ruling upholding the legality of the transfer of Smith, saying that the US marine could be held "in the US embassy or in any other place within the Philippine territory."

Leftist groups accused President Gloria Arroyo of a sellout and have filed contempt suits against five senior Arroyo aides.

Evalyn Ursua, a lawyer representing the rape victim identified only as "Nicole", has accused the Arroyo government of effectively helping "spring" the marine from jail.

The country’s second-highest court also said that since both governments had agreed to have Smith held in the US embassy, any legal challenges to the transfer of custody would be considered "moot."

Arroyo has sought her countrymen’s understanding over the controversy, insisting on Tuesday that the transfer did not violate any law and was done to prevent the further deterioration of bilateral ties with Washington, Manila’s main military ally.

Interior Secretary Ronaldo Puno said Wednesday the transfer was in keeping with the provisions of the 1999 Visiting Forces Agreement (VFA) on the legal status of US forces taking part in annual military exercises in the Philippines.

The treaty states that one party may seek temporary custody of the foreign soldier before all legal processes are completed, which Puno said meant until the appeals process has been completed.

"We cannot treat our international agreements conditionally," Puno told ABS-CBN television in an interview.

The jailing of Smith caused Washington to cancel this year’s annual joint military exercises with Manila, called "Balikatan" (Shoulder to Shoulder), a decision which was lifted immediately after the US embassy gained custody of the marine. The rape conviction is under appeal.

Puno said Manila’s international credibility was "absolutely" at stake.

He rejected critics’ allegations that Arroyo violated the Philippine judicial processes by ordering the transfer of custody.

Arroyo’s chief aide, Eduardo Ermita also said the administration was fully aware that "issues of this nature will always be exploited... (by) those critical of the administration so we are prepared for that."