Blackwater, the US mercenary company threatened with expulsion from Iraq for "cowboy tactics" and causing the deaths of civilians, has cancelled its membership of the international body set up to regulate professional standards in the security industry.

A spokesman for the International Peace Operations Association (IPOA) said yesterday that Blackwater had withdrawn from the organisation after its executive authorised an independent investigation into the company's activities and procedures.

"All IPOA companies are required to follow our code of conduct, which sets ethical and professional guidelines for the industry," he added.

"Blackwater informed us that it was withdrawing with immediate effect and was unwilling to submit to an investigation. The company has been a member of the association since 2004."

US State Department and Iraqi officials are meanwhile negotiating over Baghdad's demand that the company be expelled within six months.

The Iraqis say Blackwater employees opened fire indiscriminately and without provocation on September 16 in the capital's Nisoor Square, killing 17 innocent civilians.

Witnesses and US investigators later agreed there had been no sign of incoming fire.

The firm, which is the main security contractor for US diplomats in Iraq, has been accused of being trigger-happy in other incidents since 2004.

The Iraqis are demanding that the firm pays £4m to the families of each of the shooting victims.