Northern Ireland Secretary Owen Paterson has said that the Government is "profoundly sorry" that the victims of the 1972 Claudy bombing and their families have been denied justice.
The attack was a terrible atrocity carried out by terrorists during the bloodiest year of the Troubles, said Mr Paterson.
He said he absolutely condemned the actions of the terrorists, saying it was a despicable and evil act carried out by despicable and evil people.
A report by Northern Ireland Police Ombudsman Al Hutchinson, published on Monday, revealed that a police investigation into a Catholic priest suspected over the outrage was stopped after senior officers conspired with the government and Church to protect him.
Father James Chesney was transferred to a parish in Co Donegal, outside Northern Ireland jurisdiction, following secret talks between the then secretary of state William Whitelaw and the head of the Catholic Church in Ireland, Cardinal William Conway.
The two men discussed the scandal after being approached by a senior Royal Ulster Constabulary officer as the police were apparently reluctant to arrest the cleric for fear of inflaming the security situation.
Nine people, including a young girl, were killed and 30 injured when three car bombs exploded in the quiet Co Londonderry village of Claudy in July 1972. No-one has ever been charged with the murders.
