A leaked European parliament document reveals that individuals and businesses will be urged to encode all electronic communications to protect their emails and faxes from interception after Euro MPs found overwhelming evidence of the existence of the shadowy electronic spying system known as Echelon.

The MEPs' working document - which will form the basis of a report from the parliament's temporary Echelon committee expected next week - concludes that the primary purpose of the integrated system of spy satellites and listening posts is to "intercept private and commercial communications and not military communications".

The document - the result of the first high-level investigation into Echelon - comes after years of growing concern about the use of the spy network. Although evidence of its existence has been growing since the mid-1990s, no government has officially acknowledged involvement.

The MEPs' report coincides with a warning that Echelon could become a "cyber secret police". In a new book, Body of Secrets, about the US national security agency and its links with Britain's GCHQ, James Bamford, acknowledged to be the foremost American authority on the NSA, warned: "The real issue is whether Echelon is doing away with individual privacy, a basic human right."

Operated by the US and Britain, along with Canada, Australia and New Zealand, Echelon was designed to gather intelligence during the cold war. But in recent years, its unique global eavesdropping capabilities have provoked allegations that it is being used to intercept personal and commercially sensitive communications.

The MEPs' investigation was prompted by claims that the US had used Echelon to steal sensitive information from their European competitors. The leaked document reveals, however, that they have been unable to find evidence of any systematic use of Echelon for industrial espionage.

In a veiled warning to the UK, the only EU Echelon member, the leaked document warns that any state involved in an electronic eavesdropping system used to spy on European citizens and companies would be in breach of both the European convention on human rights and EU law.

They described as "unsatisfactory and regrettable" the lack of democratic supervision of secret services in several member states, and urged the EU to make sure that encryption software was easily available to individuals and businesses to allow them to protect their communications.

Neil MacCormick, the Scottish nationalist vice-chairman of the Echelon parliamentary committee, said: "People should treat their emails like seaside postcards; that is to say put anything you like on them but don't be surprised if someone else reads them."

Some independent privacy campaigners said the MEPs have not got far enough. They urged the committee to investigate new eavesdropping systems already in operation to address Echelon's shortcomings. They also warned that commercially available encryption software would be easily overcome by intelligence services.

The European parliament document is being studied by officials in the Foreign Office and the Home Office.

"National security versus human rights is a difficult subject", a Whitehall source familiar with the report said yesterday.