Disgraced sprinter Dwain Chambers will be free to compete at the London 2012 Olympics when a landmark drugs ruling is made in his favour.

It is understood that highly placed figures within the British Olympic Association (BOA) have privately conceded defeat in their legal battle to keep Chambers, who was banned for two years in 2003 after testing positive for systematic use of anabolic steroids, from competing in the summer games.

A BOA regulation that bans positive-tested athletes for life is likely to be ruled unlawful by the Court of Arbitration for Sport (CAS).

The sprinter has already served his two-year ban from the World Anti-Doping Agency and there will now be nothing to prevent him from being selected for Team GB at the Games.

In addition to Chambers, the ruling will allow Scottish cyclist David Millar, who was banned for taking the blood-booster EPO in 2004, to compete. He was a crucial part of the Great Britain road cycling team that won the world championships last year.

Chambers, 34, is Britain's fastest 100m runner but will still need to beat a qualifying time of 10.24sec in order to compete.

The likelihood of his being included in the Olympic Squad has angered some athletes. Heptathlete Kelly Sotherton wrote on Twitter: "It saddens me that the powers that be are going backwards in fighting drugs in sport."

Former Olympic champion Daley Thompson, who won decathlon gold at the 1980 and 1984 Olympics, claims such a court ruling could be hugely damaging to the sport.

"I will be saddened to see Dwain Chambers at the Olympic Games," Thompson said in the Daily Mail. "Not just for myself, but because it presents the worst possible message to every youngster watching: namely, that drug-taking is a worthwhile risk to take.

"For me, sport, even more then general life, should be Utopian. And cheating by taking drugs is the most heinous crime imaginable. It just shouldn't be like this. Sport should set the highest standards - not just performance-wise from the athletes but from the administrators."

BOA chief executive Andy Hunt told the Guardian he would welcome both athletes back in to Team GB this summer.

"If we were to lose, we will embrace any athletes that are able to compete as a result of the bylaw potentially falling away," he said. "We will set the tone. I hope that by setting the leadership tone in that way it will be reflected by the team."