When Mongolia's spy chief stepped off an Aeroflot flight into Heathrow a few weeks ago, he expected a welcome befitting a foreign dignitary arriving for high-level talks with the British government on a new era of intelligence co-operation. After all, preparations for his visit had included an invitation to meet Downing Street's National Security Adviser.

But rather than being ushered through Heathrow's VIP lounge for talks in Whitehall's inner sanctum, the chief executive of Mongolia's National Security Council and the one-time head of its security service was met by Scotland Yard detectives armed with an international warrant for his arrest.

Bat Khurts, Mongolia's most senior intelligence officer, is currently languishing in a cell in London's Wandsworth prison while awaiting extradition proceedings. It is an extraordinary twist to a tale of alleged trans-border kidnap and skulduggery that began seven years ago in a McDonald's car park in a French port – and has led to a diplomatic row.

Mr Khurts was arrested for the alleged drugging and rendition of a refugee who was later tortured in a Mongolian prison. Documents obtained by The Independent show that lawyers for Mr Khurts accuse Foreign Office officials of "misusing ordinary diplomatic courtesies" to facilitate the Mongolian father-of-three's arrest. Court papers allege that the Foreign Office contacted the UK Serious and Organised Crime Agency (Soca) with full details of Mr Khurts' arrival date to enable his detention on an outstanding European arrest warrant six weeks ago.

Certainly, the reception received by the Mongolian intelligence chief bore little resemblance to what seems to have been originally envisaged by the Foreign Office when he was put forward in November last year as the best person to liaise with British officials about "establishing ties" between the security services in both countries.

Mongolia, traditionally regarded as a geo-political backwater, is increasingly seen by London and Washington as a strategic ally, not least because of its geographical position, sandwiched between Russia and China. The opportunity for a closer relationship with the Mongolian intelligence services was quickly grasped by British diplomats and the intelligence services.

Papers presented to the High Court this week in a failed attempt to secure bail allege that a senior FCO official suggested that Mr Khurts meet Sir Peter Ricketts, the National Security Adviser, during a meeting with the Mongolian Ambassador to London on 31 August – nearly three weeks before the senior spy arrived. It is also claimed that William Dickson, the British Ambassador in Ulan Bator, the Mongolian capital, offered to assist in arranging Whitehall meetings for Mr Khurts.

The documents state that a day after Mr Dickson's meeting in Ulan Bator on 6 September, the Foreign Office contacted a Soca agent to say that Mr Khurts was travelling to Britain and passed on details of his flight from Mongolia. The Independent understands that FCO officials in London only became aware of the arrest warrant against Mr Khurts after the initial agreement for his visit had been reached.

But the case has echoes of the arrest of Chilean dictator Augusto Pinochet in 1998. Lawyers for the spy chief, who was travelling on a diplomatic passport, claim his status means he is immune from prosecution and was the victim of double-dealing by the British government.

A statement to the High Court on behalf of Mr Khurts said: "There has been an abuse of process of the court based on the premise that officials representing the UK in Mongolia and London misused the ordinary diplomatic courtesies shown to a high representative of a friend state to facilitate his arrest."

The reason for the current predicament of Mr Khurts, the son of a prominent Mongolian architect, dates back to the events that unfolded at 2.30pm on 14 May 2003 when Damiran Enkhbat, a refugee from Ulan Bator, arrived in the car park of a branch of McDonald's in the Normandy port of Le Havre.

Enkhbat, 43, who was wanted in Mongolia for the assassination in 1998 of a government minister and had been living in Caen after applying for refugee status in France under a false name, thought he was meeting a female Mongolian dissident.

But, upon his arrival at the restaurant, witnesses saw him being jumped upon by four Mongolian men carrying electric batons who beat him and dragged him by his hair. German police believe he was then forced to drink a sedative before being bundled unconscious into a car.

Over the next four days, the kidnap victim was driven across France to the Mongolian consulate in Brussels and on to Germany before being accompanied on to a Mongolian Airlines flight from Berlin to Ulan Bator. It is alleged by the German authorities that Mr Khurts was the driver of that car and a key member of a snatch squad. Prosecutors in Berlin issued a European arrest warrant for Mr Khurts in 2006, which was activated by his arrival at Heathrow.

He later told his lawyers that he was tortured by General Intelligence Agency interrogators who repeatedly cocked and fired a handgun pressed to his head to try to force him to confess to the murder of the minister (a claim he continued to deny until his death).

Enkhbat was eventually released from prison in 2006 but died five days later. A member of his family said the injuries he suffered during his torture had played a "key role" in his death.

Lawyers for Mr Khurts dismissed claims that his links to the Mongolian secret service made him a flight risk. They have presented a letter from Mongolia's Deputy Prime Minister providing assurances that he would not abscond, along with an offer for the intelligence chief to wear an electronic tag and reside at the Mongolian embassy in Kensington if he is released on bail.

But, for the moment, the master spy, diplomatic emissary and alleged kidnapper must remain in HMP Wandsworth after Mr Justice McCombe sitting in the High Court ruled on Tuesday that there was a risk he would flee the country.

In a statement, the Foreign Office said: "Mr Khurts was arrested under a European arrest warrant issued by the German judicial authorities. His extradition is now before the courts and it would be inappropriate for us to offer further comment at this stage."

A spokesman for the Mongolian embassy declined to comment, saying the matter was "too delicate" to discuss.

A brief history of Mongolia

* The historic homeland of Genghis Khan and an empire that once stretched to Europe, Mongolia today is a sparsely populated country which abandoned its 70-year Soviet-style government in 1990. With a population of 2.9m over 603,000 square miles of steppe land and hills – more than six times the size of the UK – it is the world's least densely populated nation.

* Despite violence which marred elections in 2008, Mongolia is broadly judged to have made a successful transition to a multi-party democracy. Nonetheless, powerful family clans continue to exert influence over Mongolian politics and corruption remains a problem. Lawyers for Mr Khurts claim he has exposed a number of corrupt officials.

* Mongolia has some of Asia's richest mineral deposits, many of them unexploited. Its main trade partner, China, has fuelled a mining boom, which is considered to be of increasing commercial and strategic importance by the West. Attempts to build military and intelligence links have seen Ulan Bator contribute troops to Iraq and Afghanistan.