A landmark legal ruling has handed Brussels the power to create criminal legislation for member states, in what eurosceptics claim is a further erosion of national sovereignty.

The ruling came at the end of a test case between the Commission and 11 EU member states, including Britain, which opposed the idea that the Commission could tell national governments what kind of offences against EU environmental law should be deemed to be criminal offences.

The verdict in the Commission’s favour now opens the door to the EU dictating when breaches of a whole range of agreed EU policies should be treated as criminal.

A Commission statement said: "The judgment concerns particular environmental legislation, but it sets an important precedent for Community law in general".

The head of the Commission’s legal service, Michel Petite, hinted that in future the Commission might not only push member states to apply criminal sanctions, but also to set the scale of sanctions - for instance a penalty of two years in jail to enforce an EU directive.

The leader of Britain’s Tory MEPs Timothy Kirkhope this afternoon gave warning about more sovereignty lost to Brussels in the wake of the court ruling:

"This appears to be a worrying erosion of British sovereignty. Nothwithstanding our support for environmental protection, this is a blow to Britain’s ability to decide things for ourselves.

"I fear the Commission sees this as an opportunity to extend its powers and start interfering in the criminal law of member states. It is a significant transfer of power to the Commission, sanctioned by a court which tends towards the integrationist approach."

"The decision on whether or not to criminalise offences in Britain should be a matter for Britain, not for the EU. We all support penalties against environmental vandals, but this sets an alarming precedent."

A UK spokesman in Brussels said that the Government would be studying the outcome and consulting other member states, adding: "We believe that criminal law is a matter for member states’ intergovernmental co-operation."

But the government spokesman insisted: "We are in favour of bringing forward minimum criminal sanctions for environmental polluters. But the objection was you shouldn’t be using the European Community to harmonise member states ’criminal sanctions."

The Commission took Britain and ten other member states to court for insisting that the question of what offences against EU law should be deemed criminal was a matter for the member state to decide.

The ruling acknowledged that, "as a general rule", neither criminal law nor the rules of criminal procedure fall within EU powers - but that did not prevent the EU taking measures relating to the criminal law of the member states "when the application of effective, proportionate and dissuasive criminal penalties by the competent national authorities is an essential measure for combating serious environmental offences".

The Commission said that now applies to any policy area - single market, environmental protection, data protection, money laundering and so on – where the EU has a legal basis to decide on policy.

However all those policies have first to be agreed by the member states, and some officials predicted today that the verdict will lead to greater reluctance to approve proposed EU legislation in the first place.

The Liberal Democrat leader in the European Parliament, Chris Davies, applauded the greater powers to enforce environmental legislation.

"Europe needs an umpire to ensure fair play between member states and to dismiss the cheats. The Commission is the only body that comes close to fitting that role and this court ruling gives it more teeth with which to bite."

Some European Commission insiders hope the case will influence a current battle between member states and the executive over who should initiate legislation on storing e-mail and telephone call records to help police track terrorists.

Member states have proposed a framework decision obliging internet and phone companies to store records of all e-mail and telephone traffic in the EU. The Commission is due to put forward its own proposals on storing communications data on September 21.

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