<preform>Saturday: Canadians buy submarine from MoD </br>Last night: Fire leaves vessel adrift in Atlantic</preform>

An air-sea rescue was under way in the North Atlantic last night after a fire on a former British submarine sold to Canada in a controversial deal left the vessel drifting at sea.

An air-sea rescue was under way in the North Atlantic last night after a fire on a former British submarine sold to Canada in a controversial deal left the vessel drifting at sea.

The incident will come as a huge embarrassment for the Ministry of Defence, coming only four days after the vessel was formally handed over to the Canadians. It was the last of four such submarines bought in a deal dogged by escalating costs, delays and reports of corrosion, leaks, turbine breakdowns and other technical faults encountered during their refits. Only one is on active service. Some reports have suggested that Canada is considering suing Britain over the deal.

The blaze led to a loss of power on HMCS Chicoutimi about 100 miles north-west of Ireland. Nine of its 57-strong crew suffered breathing problems after smoke spread through the vessel. It had to surface to clear the fumes and the injured were being treated on board.

A senior Canadian official, speaking at 6pm British time yesterday, said a towing vessel, the HMS Montrose, a Type-23 frigate, would take between 12 to 14 hours to reach the submarine. "The boat is without power and has only limited means of communicating," Navy Commodore Tyrone Pyle told reporters in Halifax. He said there had been no danger of losing the craft.

Another Canadian navy spokesman said the rescue operation was being blighted by the weather. "The seas are extremely treacherous, with six to eight metre waves and winds of 35 knots," he said. "It's going to be extremely difficult for the ships to make it out there and the sailors [on the submarine] are getting tossed to and fro something crazy. They will have a certain amount of battery-powered emergency lighting, but will be trying to conserve it."

The rescue would also be difficult, he said. "It's going to be extremely dangerous for someone to be on board that frigate throwing a line and even more dangerous for someone from the submarine crew to be outside trying to tie that up."

The spokesman said the root of the fire had been an electrical panel in a passageway. The navy had assembled investigation teams, "but our main focus right now is to keep those 57 people safe".

Formerly HMS Upholder, the submarine is a non-nuclear diesel electric "hunter-killer" vessel built for the Royal Navy in the early 1990s. The submarine left the naval base at Faslane in Scotland on Monday heading for Halifax, Nova Scotia, where it was due to arrive on 18 October.

A Ministry of Defence spokesman said events were being monitored second by second. He added: "The decision on evacuation has to be balanced against the consequence of leaving the vessel without a crew."

An RAF Nimrod from Kinloss was in the area to help with communications, while a Royal Navy search and rescue helicopter flew from Prestwick. Ireland's Minister for Defence, Willie O'Dea, said the LE Roisin, which was on routine patrol off the north-west coast, should arrive at the sub about midnight. It would offer help and monitor any threats to Irish waters. The Royal Fleet Auxiliary Wave Knight, a fleet replenishment vessel, was also standing by.

The four submarines were designed in the 1970s and built in the late 1980s and early 1990s. They were deemed surplus to requirements before work was completed after Britain decided to use only nuclear-powered vessels. The C$750m (£333m) deal to sell them to Canada was agreed in 1998. But according to reports in Canada, the total cost of the deal has now risen by 20 per cent to C$897m, as a result of technical faults and rust, which caused particular problems on the Chicoutimi.

Documents released under the Canadian freedom of information laws suggest that the MoD "cannibalised" the submarine for spare parts to get the three other vessels in working order. One suggested that the Canadians were forced to pay for an extra 5,500 replacement parts.

The delivery of the Chicoutimi was delayed by corrosion on its pressure-hull and the replacement of cracked hull valves and air turbine pumps.

A Canadian navy incident report said crews faced "a potential safety risk" and that computer systems "freeze" and lose data. When equipment did work, it did so at a speed "unsuitable for operational conditions".

BAE, which undertook the refit, has defended the delays, saying the submarines had been in the water for a long period. It declined to comment last night.

Of the four other submarines, HMCS Windsor, formerly HMS Unicorn, is the only one in service. HMCS Corner Brook, formerly HMS Ursula, is being repaired, while HMCS Victoria, formerly HMS Unseen, is to undergo sea trials this autumn.