Britain will only grant settlement rights to 4,300 ex-Gurkhas, the Home Office said, far short of campaigners' demands that they be given to all 36,000 Nepalese ex-soldiers who served with the British army before 1997.

"Over 4,000 ex Gurkhas and around 6,000 spouses and children will qualify for settlement rights in the UK," the Home Office said in a statement.

But to be allowed to stay, veterans must meet one of five conditions, including having served for 20 years or more or receiving awards for bravery.

At the moment, only Gurkha soldiers who retired after 1997 -- when their base moved from Hong Kong to Britain -- have the automatic right to stay permanently.

Other foreign soldiers in the British army can settle in Britain after four years' service.

Outside the Houses of Parliament in London, Gurkha veterans who had gathered to hear the decision voiced bitter disappointment.

Madan Kumar Gurung, 57, who will be allowed to settle in Britain under the new conditions, told AFP: "I should be happy but I am totally unhappy because so many of the boys who served with me cannot stay in Britain.

"When we joined the Gurkhas, most of us were told we had to serve 15 years, but now the British government are saying we had to serve 20 years. This is total discrimination."

Jagat Bahadur Limbu, a 51-year-old who served between 1976 and 1992, will have to continue his fight to remain in Britain following the ruling.

"This is a shocking decision for all of the Gurkhas and for Britain. I have been waiting three years to be allowed to stay in Britain," he said.

"I want to work because without work you cannot live but the government policy says I cannot."

Fewer than 100 Gurkhas will actually meet the criteria set by the government, campaigners said, despite the government's estimate of 4,300.

Some 200,000 Gurkhas fought for Britain in World Wars I and II and more than 45,000 died in British uniform. Around 3,500 Gurkhas currently serve in the British army, including in Iraq and Afghanistan.

Martin Howe, a lawyer representing the Gurkhas, pledged Friday to continue the legal battle for full settlement rights.

"It is nothing short of scandalous -- all this does is insult the integrity of the men of the brigade," he said. "We are disgusted with what we see today."

Indian-born British actress Joanna Lumley, who has been the public face of the campaign, voiced her disbelief.

"It is absolutely shocking, I can't believe that an administration running our country now can come up with something like this," she said.

"They (the government) borrowed to bail out the banks, why not borrow one billion more to bail out the Gurkhas?"

Immigration Minister Phil Woolas denied campaigners' claims that the British government had betrayed the Gurkhas.

"What we've done today is to allow even more people in without setting a precedent that would create a massive pressure in my view on the immigration service, which I don't think the public would want me to grant," he told BBC television.

London's High Court ruled in September last year that Home Office instructions to immigration officers on admitting Gurkhas were unlawful and needed urgent review.

The campaigners, who have staged repeated protests, now face going back to court in a bid to prove that the government's response to the court ruling does not go far enough.

Damian Green, immigration spokesman for the main opposition Conservatives, accused the government of "trying to evade the effects of a very clear court judgement".

"This is an insult to the Gurkhas. We have said all along that the government should not try to challenge the courts and they would have done better to listen," he added.

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