POLITICAL foes of Peter Mandelson are demanding that he should explain why he spent New Year’s Eve on the yacht of a billionaire who is at the centre of a major EU investigation.

The European Trade Commissioner was forced to admit that he was a guest at a party thrown by Paul Allen, the co-founder of Microsoft.

Details of Mr Mandelson’s Caribbean holiday emerged as the sleaze row deepened over European commissioners accepting free hospitality.

Close aides of Mr Mandelson emphasised last night that while he did speak to Mr Allen on the deck of his 414ft yacht, Octopus, he and the world’s seventh richest man did not discuss business at the drinks party. Film stars and business leaders were among the 200 guests on what has become the most coveted invitation for those holidaying on the Caribbean island of St Barthelemy.

Conservative leaders say that Mr Mandelson, who was twice forced to resign from the Cabinet over allegations of sleaze, should learn the lessons of the past, demanding that he should be “totally open” and branding him “naive”.

The EU sleaze row also embroiled José Manuel Barroso, the Commission President, who yesterday promised a written explanation of his free family holiday on the yacht of a Greek shipping billionaire.

The Liberal group, the third largest in the European Parliament, called for commissioners to operate on the same rules as British politicians and declare any free holidays they take.

Graham Watson, the group leader, said: “Hospitality should be treated just like a gift, and should be declared. There is a case for transparency.”

A week after all 25 commissioners agreed to a statement saying they had not accepted any improper hospitality, it emerged that Mr Mandelson had tacked on a four-day stay with friends in the Caribbean island of St Barthelemy during an official visit to the region. Last night he was still refusing to disclose who his hosts were.

Local observers say it was Mr Mandelson’s host who was invited to the party on the yacht anchored off the port of Gustavia and took his holiday companion along with him.

During the party on the Octopus, Mr Mandelson and Mr Allen greeted each other, but his spokesman insisted that “there was no substantial conversation” and that the pair merely exchanged pleasantries.

His opponents say his presence could be a serious conflict of interest. Microsoft is in a protracted legal battle with the European Commission, which last year fined it £355 million for abusing its near-monopoly in the software market. Microsoft and the Commission are still in often turbulent negotiations about how to verify that the company has changed its business practices. The Commission said yesterday that if it was not satisfied with Microsoft it could still impose a daily fine of 5 per cent of its global turnover.

As a Commissioner, Mr Mandelson would have a say on any fines imposed on Microsoft, which would have an impact on Mr Allen’s fortune.

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