The European Commission is preparing to sue the British Government for failing to properly open up the rail freight market to competition.
Loyola de Palacio, the transport commissioner, has given the Department for Transport two months to agree to new legislation or face being hauled in front of the European Court of Justice.
The Commission wants EU member states to introduce common legislation to promote competition in the rail freight market, under a series of directives agreed in 2001. Although the market is privatised in Britain, Brussels believes that the laws are insufficient and warned the Government in April that they needed changing.
A spokesman for Ms Palacio said: "We have still not had a response from the British Government. This is very serious. We have made the position clear; it is not complicated. If we have European law then we have to implement it. Member states can't just say on the one hand 'yes' and then refuse to turn it into law on the other."
Ms Palacio's spokesman added that Britain's refusal to introduce the directive could also damage its standing when negotiating with other member states.
"There is a certain political price for doing this. If there are important EU negotiations going on then it is difficult [for the UK] to put pressure on other countries to liberalise their markets," he said.
France, which Britain has consistently accused of dragging its heels in liberalising its energy markets, "responded very quickly", said the spokesman.
In total there are 10 countries facing legal action for compliance failures,including Germany, Ireland, Italy and Spain.
A Department for Transport spokesman said: "Our markets are already highly liberalised. With hindsight, the deadline was over-ambitious. The problem for us is that this coincided with the post-Hatfield work to get the rail industry back on track. We will respond to the Commission within two months."