Because Abdallah al-Senussi is being tried in Libya, ICC judges "concluded that the case is inadmissible before the court, in accordance with the principle of complementarity," it said.
The ICC stressed that the Senussi decision had no bearing on the case against Gaddafi's son Seif al-Islam, who is still wanted in The Hague.
Gaddafi's former heir apparent and others including Senussi are accused of crimes during the revolt against Gaddafi two years ago.
The ICC's founding document, the Rome Statute, says that the ICC cannot carry out proceedings against a suspect if they are receiving a fair trial on similar charges in a domestic court.
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The court said the decision could be reviewed if it appeared Senussi was not getting a free trial.
The pre-trial chamber "found that the evidence submitted by Libya is sufficient to conclude that the Libyan and the ICC investigations cover the same case and that concrete and progressive steps are being undertaken by the domestic authorities in the proceedings against Senussi."