The European Commission has not been notified of the €57 million compensation package the government will be paying to bus owners to pave the way for the public transport reform.

"We were not notified of any state aid involved in the recent deal with Maltese bus owners and we are not sure whether this is required without having the full details," a spokesman for the European Commission in Brussels said.

Pressed to say whether the compensation amounts to state aid, the spokesman said the Commission was not in a position to make a statement on the issue "as this requires an investigation by our experts to establish whether this deal amounts to state aid and if any competition rules were broken.

"At the moment we have no intention of conducting such an investigation as no complaint has been filed on this issue to the Commission. If it is signalled to us that there might be state aid issues involved we will carry out our investigations according to EU rules."

On its part, the Maltese government is making it clear it does not intend notifying the Commission because it does not view the compensation to be state aid.

"There is no need to notify the EU Commission for the government to implement this type of specific transaction. It should be recalled that compensation is being granted because licences and the rights arising from those licenses are being withdrawn by state action," a Transport Ministry spokesman said.

Despite the government's view, EU legal experts who spoke to The Times argued that there might well be an issue because the money involved would ultimately come out of public coffers. "Although the money, a massive amount in Maltese terms, might not be regarded as direct state aid, I can't understand how a simple notification under EU rules is not even required," a lawyer specialised in EU matters said.

"The main argument in the government's favour is that funds are being used to buy the bus drivers out of business and not subsidising them to keep their business running. Still, this is quite a tricky issue and needs a thorough investigation to establish the facts and whether this compensation amounts to state aid."

Another lawyer based in Brussels said that a notification was definitely required.

"I really cannot imagine how the government of Malta could get away with not notifying something on this scale and with this level of openness and publicity," he said.

The government has accepted to give bus owners a compensation package that will cost it about €53.8 million in exchange for their buses and operating licence in the case of bus owners in Malta and a further €3.1 million for their Gozitan colleagues.