Ferry company P&O is suing the British government over its decision to hand over £33 million of public money to a Channel Tunnel operator to settle a legal battle over secretive no-deal Brexit contracts given to three shipping firms, including one with no boats.

The three ferry companies were Brittany Ferries, DFDS and Seaborne Freight, which has no ships and has never run a ferry service.

Chris Grayling, the UK Secretary of State for Transport, has been heavily criticised for the Seaborne deal, which would have been worth £13.9 million (Dh67.6 million).

The Department for Transport ended up cancelling the contract in February after the Irish company backing Seaborne pulled out.

In March, it was revealed that the government would pay Eurotunnel, the public company that operates the Channel Tunnel between the UK and France, the £33 million to settle a legal battle over the three contracts.

Eurotunnel said the contracts were handed out in a "secretive" way and it was not given a chance to compete.

"We have repeatedly made clear during decades of providing vital transport services between Britain and the Continent [Europe] that we are happy to compete with other providers on a level playing field,” a spokesman for P&O Ferries said. “We also fully accept that it was prudent of the Government to make contingency plans to protect international supply chains in the event of a hard Brexit."

"However, we do not believe that the payment of £33 million of public money to Eurotunnel to settle its legal challenge to these plans is fair or reasonable. It is explicitly designed to be invested in the tunnel's infrastructure and if left unchallenged would put our services at a competitive disadvantage."