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A £33m settlement agreed with Eurotunnel after a botched Brexit deal could fall foul of EU state aid rules, according to Chris Grayling, the secretary of state for transport.
The company received the money after it threatened to sue the government over a decision to award contracts to ferry companies to provide extra Channel crossings in the event of a no-deal Brexit.
Eurotunnel in Folkestone said it should have been given an opportunity to bid for the contracts, designed to ease possible delays at ports.
Mr Grayling told MPs on the transport select committee there could be a question over whether the sum could be construed as state aid and in breach of European Commission rules.
As part of the agreed settlement, the government said the money should be spent on improving services for the public.
Mr Grayling told MPs on Wednesday the government had collectively agreed to a settlement with Eurotunnel because it did not want to jeopardise the supply of medicines and medical goods, he said.
“That settlement was agreed on the undertaking that the money would be spent on improving facilities at the UK border which will benefit the UK.”
“There is a challenge to that settlement but the nature of that settlement means that if any part is construed as inappropriate state aid, it is recoverable from Eurotunnel.”
He told MPs that the new deadline for Brexit meant that it was not necessary to arrange extra capacity so far in advance.
The earlier plans the Department for Transport arranged which led to the controversy - coincided with the busiest period for ferry companies.
“It was peak season so there was very little spare capacity. As it was the busiest time, we had to book capacity months in advance.”
On the legal challenge that Eurotunnel threatened, he said: “It is a matter of great regret to me that a company that has been excluded by the competition authorities from running a ferry service should take us to court on the basis that it should be allowed to run a ferry service.”
That was a reference to a decision in 2013 prohibiting Eurotunnel from operating a ferry service.
P&O Ferries and DFDS Seaways had complained to the watchdogs about alleged unfair competition after Eurotunnel bought three vessels from the defunct SeaFrance and leased them to a co-operative of former SeaFrance workers to create operator My Ferry Link.
Conservative committee member Huw Merriman asked Mr Grayling if he had been leaned on to settle the case before it got to court, saying it was outrageous that Eurotunnel had “tried it on.”
Grayling said he had “very much” wanted to go to court but the government had decided not to on the basis that it did not want to risk the possible disruption of goods crossing the Channel.
