A decade after the Abu Ghraib scandal, a US federal appeals court has reinstated a lawsuit against a defense contractor accusing its employees of torturing detainees at the Iraqi prison.

CACI International, based just outside the US capital in Arlington, Virginia, was accused of abusing and torturing Iraqi prisoners at the jail while it was managed by the American military.

The plaintiffs in this case are four Iraqi detainees, and the US-based Center for Constitutional Rights filed the suit on their behalf.

The prison west of Baghdad became a potent negative symbol of the US occupation to many Iraqis after evidence emerged of detainee abuse by American soldiers at the facility.

Most of the abuse took place at the end of 2003, when CACI employees were working in the prison, according to the civil suit filed in 2008.

The company's civilian employees were accused of having encouraged US soldiers to abuse the prisoners to prepare them for interrogation.

A former co-defendant in the case, L-3 Services Inc. (now a subsidiary of Engility Holdings), agreed last year to pay $5 million to 72 Iraqis abused at the site.

Criminal charges were brought against 11 low-ranking guards, including former army reserve specialist Lynndie England, who was shown smiling in photographs while posing next to naked prisoners being submitted to sexual abuse. She was paroled in 2007.

The Fourth Circuit Court of Appeals found that a lower court erred in concluding it lacked jurisdiction to rule on the case because the alleged abuse took place and broad, and in tossing out the case against CACI in 2013.

The plaintiffs claims "touch and concern the territory of the United States with sufficient force to displace the presumption against extraterritorial application," the court ruling read.

The decision found that CACI could be held liable in US court under a section of the US Code called the Alien Tort Statute, which allows non-US citizens to file suit in US courts for human rights violations for incidents that took place outside the United States.

"Today's court ruling affirms that US corporations are not entitled to impunity for torture and war crimes and that holding US entities accountable for human rights violations strengthens this country's relationship to the international community and basic human rights principles," said the plaintiffs' attorney Baher Azmy.

CACI claims that most of the alleged abuse was approved by the then-US defense secretary, Donald Rumsfeld, and incorporated into rules of engagement by military commanders at the prison, court documents showed.

In June 2011, the Supreme Court refused to hear a complaint by 250 Iraqi prisoners against CACI and Titan Corporation, another private contractor that once provided services to the US military at Abu Ghraib.

In an irony of history, Abu Ghraib also served as a torture center under executed dictator Saddam Hussein's ousted regime, with an estimated 4,000 detainees dying there.