Concern is rising in Government circles about the potential implications of an EU Commission investigation into licence fee revenue and grant aid paid to TG4 and RTÉ.

The EU Commission investigation was prompted by a TV3 complaint which alleged that revenue paid to RTÉ and TV3 could infringe elements of EU law.

The Minister for Communications, Marine and Natural Resources, Mr Dempsey, has been advised by senior officials that the issue might need to be addressed in the short term.

If the EU Commmission finds against the Government, RTÉ and TG4 could be forced to repay millions in licence fee revenue and grant aid. This happened in a recent case in Denmark where the public service broadcaster was required to repay some €84 million to the Danish government.

According to a memo prepared for Mr Dempsey, officials of the Department of Communications have been forwarding large volumes of information to the EU Commission investigators.

The Government will have to prove that funds paid to RTÉ and TG4 were allocated based on a clear public service remit. This remit must be properly defined and programming of a clear commercial nature cannot be funded via the licence fee, some legal observers argue.

TV3 in its original complaint also claimed that commercial (normally advertising) revenue must be clearly distinguished from licence fee or grant-based revenue.

Another key issue is whether public monies paid to RTÉ and TG4 represent "existing aid" or "new aid". This is usually based on whether the aid started before or after 1973. This is important because "existing aid" does not have to be repaid, whereas new aid may have to be repaid.

RTÉ has been receiving licence fee revenue for decades. However, Network 2 (now RTÉ 2) only began broadcasting in 1979. TG4 has only been on air more recently so its position could be the most difficult for the Government to defend.

RTÉ has declined to comment on the case at this time. TV3 said it noted the importance the Department placed upon the state aid complaint by it in relation to the manner of funding of the State broadcasting sector.

Mr David McMunn, legal and regulatory affairs manager, said: "It is unfortunate that we had to make this complaint, which we initiated in 1999 and supplemented this year. It was necessary given that, at a national level, our concerns about the funding of RTÉ were not addressed in any effective way.