The case originated in 1998 when the United States failed to remove tariffs it had imposed in 1993 on supposedly-subsidised imports from privatised European producers, and the EU members (Britain, France, Germany, Italy, Sweden and Spain) complained to the WTO.

Last July, the WTO ruled in favour of the Europeans, and the US appealed, giving rise to last week's judgement, which applied to some, but not all, of the July ruling.

The case concerns subsidies ('state aid') given to the steel firms before privatisation. The WTO panel said that the earlier ruling had been based on the erroneous finding that a market privatisation always prevented the benefit from the state subsidy from accruing to the new private firm. The new judgement says that while privatisation gives rise to a presumption that the benefit is expunged, it is rebuttable.

However, the WTO upheld an earlier finding that Washington had acted inconsistently with the agreement by imposing and maintaining countervailing measures on steel products from privatised European steel companies without determining whether subsidies actually continued to exist.

A US Trade Representative spokesman in Washington said: "We are pleased that they found the underlying US law to be consistent. But we are disappointed with their findings concerning the methodology."