The witness codenamed Person 56 began his evidence in the Federal Court on Monday but stopped short during questions about a November 2012 mission to Fasil in Afghanistan.
His lawyer Sean Richter successfully argued the offence to which he would incriminate himself was of "the most serious nature".
"It's not something to be trifled with."
It is alleged that Person 56 and the war veteran executed two prisoners in Fasil, according to a statement documented in a previous ruling by Justice Anthony Besanko.
Despite an offer of immunity from Justice Besanko Person 56 said he was still unwilling to speak and the newspapers' barrister, Nicholas Owens SC, did not seek to compel this evidence.
Arthur Moses SC, representing the Victoria Cross recipient, said Mr Owens did not press the issue due to a "deal" to pressure Person 56 to come to court.
"It's true is it not ... that you felt threatened that if you didn't cooperate with them then they would call you and make assertions against you in relation to an allegation in Fasil involving yourself?" Mr Moses said
"Yes," Person 56 replied.
If he did not agree to speak in court about a Darwan mission he thought he would be legally forced as a "hostile witness" and asked questions about the alleged execution, he said.
The former elite soldier said during negotiations between his lawyers and those for the defence he was suffering from mental health issues and his wife was undergoing cancer treatment.
As a trooper, the witness said he was deployed to Darwan in Afghanistan in September 2012 under patrol commander Mr Roberts-Smith.
Following the mission, his squadmates spoke about an incident whereby "an individual had been kicked off a cliff and subsequently shot".
It is alleged this incident - that Person 56 did not witness - involved Mr Roberts-Smith kicking an unarmed Afghan prisoner down a creek bed who was then executed.
The former SAS corporal denies this allegation and all others The Age, The Sydney Morning Herald and The Canberra Times are defending as true.
The 43-year-old is suing the mastheads over reports claiming he committed war crimes in Afghanistan including murder, and acts of bullying and domestic violence.
Meanwhile, Mr Roberts-Smith has applied for another judge to hear an application to appeal his failed court bid in having his ex-wife quizzed about confidential information in an email account.
In January Justice Robert Bromwich said Mr Roberts-Smith had not provided sufficient bases to examine Emma Roberts of information obtained from her ex-husband's "RS Group Australia" email account.
He ruled that Ms Roberts accessed the email account for a "legitimate purpose" after suspecting that Mr Roberts-Smith was having an affair with a female solicitor acting for him in court proceedings.
Another judge will hear this application to appeal the ruling on April 20.
