News the Government has launched an inquiry into the spy agency GCSB's activities over the Kim Dotcom case has made headlines around the world.

The BBC website said an inquiry had been ordered into "unlawful spying", and said the announcement by Prime Minister John Key "will be seen as another blow to the integrity of the US case".

The Wall Street Journal said New Zealand was "investigating allegations that its Government Communications Security Bureau acted unlawfully in connection with one of the largest criminal copyright cases to date".

The Guardian said the investigation "may deal another blow to the US case after a New Zealand court ruled in June that search warrants used in the raid on Dotcom's home earlier this year, requested by the FBI, were illegal".

The Computerworld UK website said the development meant the Megaupload/Kim Dotcom case "gets even weirder". In a blog on the website, writer James Firth said: "It's hard for democracy to survive if the government reads all our email and taps all our phones - even though this might reduce all instances of online copyright infringement to near zero."

Meanwhile, Dotcom himself has continued to comment freely on the case, via Twitter. "You have reached the office of Planet Key. All our agents are busy undermining your rights and selling your assets. Goodbye," he tweeted overnight.

- © Fairfax NZ News