Mr Robert Fellowes, who is married to Diana's sister Jane and was formerly private secretary to Queen Elizabeth II, testified at a coroner's inquest that he was in Norfolk in eastern England on the August night that Diana and her boyfriend Dodi Fayed were in a fatal car crash in Paris.

Fayed's father, Mr Mohamed Al Fayed, has claimed that Mr Fellowes - now Lord Fellowes - had commandeered a communications post at the British Embassy in Paris on the night to send messages to an intelligence agency as part of a murder plot.

Lord Fellowes also testified that the queen, like Diana, was concerned about the possibility of bugging, and that public rooms at Buckingham Palace were regularly swept for eavesdropping devices.

He also revealed that the palace, after consulting the government, decided not to initiate an investigation of the interception of embarrassing telephone calls involving Diana and her former husband, Prince Charles.

Mr Michael Jay, who was Britain's ambassador in Paris in 1997, testified on Monday that Fellowes was not at the embassy on the night of Aug. 30-31, when the crash occurred.

Mr Ian Burnett, a lawyer employed by the coroner, Lord Justice Scott Baker, reminded the inquest that Al Fayed had alleged that Fellowes had been at the embassy from 11 pm, shortly before the crash, and had commandeered a message center.

'In other words it was being suggested that you were intimately concerned in the murder of your sister-in-law. You understand that that was the allegation?' Mr Burnett said.

Lord Fellowes nodded.

Asked whether he was in Paris on the night, Lord Fellowes said: 'We were in Norfolk that evening, we had people to stay, we went to an entertainment by Mr John Mortimer in Burnham Market church.'

Lord Fellowes said there was concern at the palace in 1993 following the leak of two telephone conversations: one between Diana and her friend James Gilbey, who called her 'Squidgy', and another intimate chat between Charles and Camilla Parker Bowles, who became his second wife.

Mr Al Fayed's lawyers have alleged that Diana's conversation was intercepted by GCHQ, the electronic monitoring arm of British intelligence.

Lord Fellowes said the government advised against a formal investigation, fearing that if it became known it would be seen as confirmation of some involvement by government agents in the interception.

The inquest has heard testimony about Diana's fears of surveillance, and that she had ordered sweeps of her rooms at Kensington Palace that turned up no firm evidence of bugging.

Lord Fellowes said the queen had similar concerns, and the office where he met the queen was regularly checked.

'I wouldn't say it was a constant preoccupation but yes we needed reassurance at regular intervals that there was no bugging going on,' Lord Fellowes said.

The coroner disclosed Monday that the cost of the inquest has reached 2.2 million pounds.

Nearly 1.1 million pounds, was spent on the team of lawyers assisting Baker.

The next largest expenditure, some 370,000 pounds, was for the jury's visit to Paris and the cost of video conferencing for witnesses testifying from Paris and from other countries.

The figures, disclosed Monday, cover the period through Jan 31 and do not include the amount spent by Mohamed Al Fayed and his Ritz Hotel for their own teams of lawyers; nor does it include the cost of the British police investigation, which reportedly cost 3.6 million pounds. -- AP