The Shipping company P&O has been advised by its lawyers that once ships and planes pass 12 miles outside territorial boundaries, duty-free shopping can take place.

Ferry fares may rise when duty free is axed

P&O is seeking clarification from EU single market commissioner Mario Monti.

It believes that once a plane or ship passes into international airspace or waters then there is nothing to stop duty-free purchases being made.

The ruling, if accepted by the EC, would not save duty-free sales on the Dover-Calais crossing - the busiest and most lucrative of the cross-Channel routes, as ships never get more than 12 miles from either France or England.

But longer Channel crossings, such as P&O's route between Portsmouth and Bilbao in Spain, and various North Sea sailings, could be exempt from the duty-free ban which is due to take effect next summer.

The European Union has decided to phase out duty-free sales because of the introduction of the single market.

The ban on duty free comes into force next summer

A P&O spokesman said the company had "taken advice from a QC as well as from a firm of international lawyers and have also been in touch with HM Customs and Excise."

"There is a great lack of understanding and agreement within the EC about what arrangements will be put in place after next summer. We want someone to explain just what is going to happen and just what we will be allowed to do."

The loss of duty-free is expected to cost the UK dear in terms of lost jobs and lost revenue, with ferry and airline fares likely to rise.