High Court appeal Judges John Thomas and Duncan Ousely rejected Assange's claims that it would be unfair and unlawful to send him to Scandinavia to be questioned over the alleged rape of one woman and the molestation of another in Stockholm last year. The 40-year-old has denied wrongdoing, and insists the case is politically motivated by those opposed to the work of his secret-spilling organization.
"We will be considering our next steps in the days ahead," Assange said outside the court. He did not seem angry or visibly upset, despite the substantial legal setback.
Lawyer Mark Summers confirmed that it was not clear whether his client would attempt an appeal to Britain's Supreme Court. His legal team has 14 days to decide whether to apply to the High Court, and then must try to persuade judges that there is a point of law to justify an appeal to the highest court.
It means Assange will remain in Britain for at least several more weeks, and could potentially extend his fight against extradition into next year. At a hearing, the appeal judges confirmed that Assange would remain on bail, held under virtual house arrest at a friend's country estate in southern England.
Legal experts insisted the odds are now stacked against Assange avoiding extradition to Sweden.
"I think it's highly likely that he'll be in Sweden before the end of the year," said Julian Knowles, an extradition lawyer not involved in the case.
Vaughan Smith, the owner of the country mansion where Assange is living, said his friend's prospects appeared bleak. "It's not good news," he told The Associated Press.
Smith said Assange is concerned about the impact on his organization if he is sent to Sweden, fearing he would likely be held in prison as he contests the allegations against him.
"How can you run WikiLeaks from a jail? You can't," Smith said. "There is a pretty good reason for him not wanting to go to Sweden."
It's also not clear whether Assange has the resources to fund a continued legal battle. In a recent dispute over his autobiography - a draft of which was published without his permission - the WikiLeaks founder revealed that he'd fallen out with his previous lawyers over the size of his bill and didn't have enough cash to sue his publishers.
Assange and his supporters say he's not drawing on WikiLeaks funds for his defense.
In the ruling, the appeal judges rejected key arguments from Assange's legal team. They said Sweden had the right to issue a warrant for Assange, rejected claims that the alleged offense had been inaccurately described, dismissed issues over Sweden's process for instigating criminal inquiries, and ruled that the prosecutors had been proportionate in their actions.
"This is self-evidently not a case relating to a trivial offense, but to serious sexual offenses," the judges wrote in their ruling, upholding an original court decision in February that Assange should be extradited.
Assange has said the sexual encounters were consensual, and his lawyer, Ben Emmerson, had previously argued the allegations would not be considered crimes in England.
The appeal judges said that apparent inconsistencies in some of the allegations against Assange should not affect his extradition to face questioning - even though those issues could be valid in any future trial. They cited as one example the fact that one woman who claimed Assange had unprotected sex with her against her will while she was asleep had later said she might have been partially awake.
"These are matters of evidence which would be highly relevant at trial," the judges wrote. But "it is not for this court to assess whether the allegations may fail."
With Assange one step closer to extradition, it's an open question whether his site can survive.
WikiLeaks finances are under intense pressure and some of its biggest revelations are already in the public domain. Only last week Assange warned that the site was so low on cash it would have to stop publishing leaks and could shut down altogether in two months unless its funding improves.
Assange also faces possible legal action in the United States, where prosecutors are weighing possible criminal charges.
Bradley Manning, the U.S. Army analyst suspected of disclosing secret intelligence to WikiLeaks, remains in custody at Fort Leavenworth prison in Kansas. His case is pending in a military court.
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Associated Press writers Raphael G. Satter and David Stringer contributed to this report.
