The Crown Prosecution Service is reconsidering whether to prosecute a far-right activist for alleged antisemitism on the eve of a highly unusual legal challenge to its decision to let the case drop.

Government lawyers were due at the high court in London on Wednesday for judicial review proceedings brought by the Campaign Against Antisemitism. The case challenged the CPS decision not to charge a prominent far-right activist, Jeremy Bedford-Turner, for allegedly making antisemitic comments at a demonstration in July 2015.

A judge in the judicial review proceedings said in January that the case raised “potentially important issues for society in this growing area of racist and religious hate crime”.

But on Monday the CPS announced that, following advice from its barristers, it would not argue the case and would instead have a more senior lawyer within the CPS re-examine whether Bedford-Turner should face criminal charges, paying particular attention to section 17 of the European Convention on Human Rights (ECHR), known as the “abuse clause”.

The CPS originally examined the allegations against Bedford-Turner for five months, but decided in December 2015 a jury was unlikely to convict him of incitement to religious or racial hatred.

“We have agreed that the prosecutor’s original decision not to charge should be reviewed by a more senior lawyer within the CPS,” a spokesman said. “This decision follows the receipt of new advice from counsel concerning the way in which ECHR issues were considered as part of the decision-making in December 2015. It would be inappropriate to comment further on the case at this time.”

Gideon Falter, chair of the Campaign Against Antisemitism, said the government had shown “complete intransigence” until the last minute: “They’ve waited until the 11th hour to stand down on it. For me this is astounding, because they’ve conceded unequivocally.”

Bedford-Turner is alleged to have appeared at a sparsely attended rally in Westminster, where he said: “All politicians are nothing but a bunch of puppets dancing to a Jewish tune, and the ruling regimes in the west for the last 100 years have danced to the same tune.” He allegedly added: “Let’s free England from Jewish control.” The Campaign Against Antisemitism says he claimed the French revolution and both world wars were perpetrated by the Jews.

Weyman Bennett, joint secretary of Unite Against Fascism, said: “Even if the prosecutions are unsuccessful, the impact of prosecuting people who are carrying out those crimes will be to show – instead of being lenient on it – that there’s a genuine attempt to understand that in the present atmosphere and the rise of hate crimes post-Brexit that it’s important to nip these things very, very early on.”