BRITISH Steel is to sue the European Commission over its decision late last year to approve State subsidies for Irish Steel. British Steel's move comes at a difficult time in Britain's relations with the EU, with tempers running high over the BSE crisis.
The Commission approved Dublin's plans to inject £39 million into Irish Steel, as part of a sale to Ispat International, only as the British government dropped its opposition after prolonged and delicate negotiations.
But British Steel started assembling a legal case against Brussels last December. Yesterday, the company said it was planning to file a complaint, possibly in the next few days, at the European Court of Justice.
British Steel wants the aid to be declared illegal and repaid to the Government, which would scupper the sale to Ispat.
Roogovens, the Dutch steelmaker, and the German Steel Federation, are expected to file similar claims.
The Department of Enterprise and Employment said last night it was satisfied the grounds on which the aid was granted were sound and would stand up in court. "I am absolutely confident," said a spokesman.
A Commission official said companies were welcome to exercise their right to challenge decisions in the courts.
The legal action, which could take two or three years to complete, will not stop the aid being plaid. The Government is due to sign a contract in the next few days with Ispat International, the London based international steel company which is buying Irish Steel. It will use the aid to modernise the plant and increase output from 258,000 tonnes in 1994/ 95 to 320,000 tonnes.
British Steel is engaged in a lengthy battle with the Commission over state aid for Europe's ageing and inefficient steel plants. Although member states agreed to end most forms of subsidy as long ago as 1985, payments have continued, notably £5.5 billion approved in 1993, mainly for Ilva of Italy and Spain's CSI.
British Steel has appealed against these grants and a decision is expected later this year.
British Steel is especially incensed by the Irish case because it claims it involves an increase in output whereas it says the previous grants were made on condition of production cuts.
The Commission accepts the Irish decision was exceptional. But it argues that strict output and sales limits on Irish Steel will limit the impact on other producers.
