Iraq's highest court refused to dissolve the parliament as demanded by the powerful cleric Muqtada al-Sadr and millions of his followers. This has become a stumbling block in the power struggle that led to bloody clashes in Baghdad last month, Reuters reports.

The federal supreme court has said the parliament should be dissolved if it is shown to be failing in its functions. Iraq's parliament is the powerful body that chooses the president and prime minister and must approve all laws.

The political crisis in Iraq, which began after the elections in October, led to violence in the streets and the worst clashes the country has seen in years.

Sadr was the biggest winner of the October vote, but in June he recalled all of his lawmakers, nearly a quarter of parliament, after his movement failed to form a government.