A political group linked to Ukip has lost a legal attempt to restore EU funds that were suspended over fraud allegations, adding to financial pressure on Eurosceptic parties.

The European court of justice rejected an appeal by the Institute for Direct Democracy in Europe for the release of €670,655 (£587,389) in EU funds, which the organisation had been denied, pending an investigation by Olaf, the EU’s anti-fraud office.

The IDDE was the Eurosceptic foundation affiliated to the Alliance for Direct Democracy in Europe, a pan-European political party dominated by Ukip, but also including members from Germany’s hard-right Alternative für Deutschland. IDDE and ADDE are now effectively defunct, two sources told the Guardian, after funding scandals led to their EU grants drying up.

Authorities at the European parliament froze grant payments to the IDDE in December 2016, pending an investigation into “presumed irregularities”, according to official minutes. Donors to the IDDE in Belgium, the Netherlands and Poland were suspected of giving money to the group in exchange for winning lucrative contracts, according to an internal document seen by the Guardian. The contracts, part-funded by EU money, were deemed irrelevant to ADDE’s intended purpose of debating European public policy.

An Olaf investigation into the donations is ongoing.

The IDDE took the European parliament to court for suspending its 2017 grant, which would have been worth €670,655. Issuing a judgment on Thursday, the ECJ said it would be “illogical and even contrary to the requirement of protection of the financial interests of the European Union” if the parliament had to award EU money to “beneficiaries suspected of having committed serious irregularities”.



In a further blow to Eurosceptic forces, the court ordered IDDE to pay the parliament’s legal costs, although it remains unclear who will pay the bills. A former spokesperson for the ADDE/IDEE could not be reached.

One source familiar with the groups said: “They are defunct and all this is just a wrapping-up exercise.”

The ADDE had to repay €173,000 in 2016 when auditors found it had spent European funds on Nigel Farage’s failed campaign to win a UK parliamentary seat in 2015 – breaking rules that prohibit using EU funds for domestic campaigns. At the same time, the IDDE was asked to repay €35,000 of EU money spent on Ukip’s national polling and a Dutch Eurosceptic party’s no campaign in a referendum in the Netherlands.

Separately, the European parliament has been investigating Ukip MEPs for alleged misuse of EU funds over payments to assistants, which resulted in Farage being docked half his MEP salary last month.