Lawyers involved in the massive Factortame litigation face not being fully paid after a Government challenge to their conditional fee arrangements (CFAs). Their fees relate to over two years of work and are understood to amount to millions of pounds

Sources say some has already been paid, but the lawyers, from Edwin Coe, and 11 Stone Buildings barristers Alan Gourgey and Jonathan Middleburgh, as well as their experts, face being denied a considerable sum.

The lawyers are understood to be seeking advice from law firm Gordon Dadds, which specialises in costs.

In Factortame, the High Court found that the UK's Merchant Shipping Act 1988 was contrary to European law when Spanish fishermen were discriminated against by losing access to UK waters despite having licences to fish in them. Edwin Coe represented a group of fishermen, who won damages of £18m from a total payout of £35m.

The Government is using as the basis of its claim the fact that, while the lawyers' 1998 CFAs were then enforceable, they later were not because of the Court of Appeal's findings in Geraghty v Awwad, and also by fresh Law Society CFA regulations introduced in 2000. However, Edwin Coe renegotiated its CFA to put it in line with these changes.

Fees owed by the Govern-ment to claims management company MPC, which provided forensic expertise and other services for Ernst & Young, Edwin Coe's experts, are also being challenged.

It is expected that the lawyers will challenge the Government's claim during assessment of costs, when a costs judge determines how much lawyers are owed.

Edwin Coe was first instructed in late 1998 to handle damages owed to some of the claimant fishermen. Thomas Cooper & Stibbard was involved in Factortame for 12 years for many of the fishermen, but as it was not instructed on a CFA, it is not subject to a challenge.

The Government has already unsuccessfully challenged the CFA of accountants Grant Thornton, instructed by Thomas Cooper for ancillary litigation services in Factortame.

MPC was unavailable for comment at the time of going to press.