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The ruling halts the case brought forward in 2016 by former chief of staff of the Iraqi Army, General Abdul Wahed Shannan Al Rabbat, who sought to prosecute Blair along with his former foreign secretary and attorney general.
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The CPS application to halt the case was approved in court last week by Judge Jane Miller QC.
Yesterday, anti-corruption campaigners began a legal action to overturn the decision to halt the case.
The latest development temporarily halted the case at the Crown Court in Southwark, a district of London.
The original decision to halt the case against YouTube also ended a case brought by the UK's Football Association Premier League, restarting their battle with Google.
Because the charges have been brought under the 1906 Corruption Act, Lady Scotland can halt the case before it reaches trial.
The brunt of the frustration over the cost of the Nichols defense, $1.2 million and counting, has fallen on the judge, Hilton M. Fuller, who halted the case last year because Mr. Nichols's lawyers and legal expenses were no longer being paid.
Halfway through a two-day hearing, the bench of seven justices in the UK's highest court abruptly halted the case and announced on Monday afternoon that it had found against the Ministry of Justice.
In his judgement halting the case, Mr Justice Sweeney said Mr Downey had received an assurance in 2007 that he would not face criminal charges, despite the fact that police in Northern Ireland knew he was still wanted by Scotland Yard.
On Tuesday, a judge at the Old Bailey in London halted the case because Mr Downey had a letter from the Northern Ireland Office dated from 2007, assuring him that he would not face criminal charges even though police in Northern Ireland knew he was still wanted by Scotland Yard.
The killing moved into suburban LA's Orange County before it appeared to halt, the case going cold.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com