THE Government is to pay out more than £220 million to a US defence firm after a tribunal found it had unlawfully terminated a contract to provide the controversial eBorders programme.

An Arbitration Tribunal awarded Raytheon Systems Limited £49.98m in damages after it found the processes the now-defunct UK Border Agency used when reaching a decision to scrap the agreement were flawed, a letter from the Home Secretary to Keith Vaz MP reveals.

The Home Office must pay also Raytheon £9.6m for disputed contract change notices, £126m for assets acquired through the contract between 2007 and 2010 and £38 million in interest. eBorders, devised by the Labour government in 2003, was designed to count everyone in and out of the UK by collecting advance passenger information on all scheduled inbound and outbound journeys to and from the UK.

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In her letter to Mr Vaz, Theresa May said: "The Treasury will work with the Home Office to make sure these costs are met without any impact on frontline services. We are looking carefully at the tribunal's detailed conclusions to see if there are any grounds for challenging the award.

"The Government stands by the decision to end the eBorders contract with Raytheon. This decision was, and remains, the most appropriate action to address the well-documented issues with the delivery and management of the programme."

The Home Secretary said key milestones had been missed by Raytheon in 2010 and parts of the programme were running at least a year late: "The situation the Government inherited was, therefore, a mess with no attractive options. All other alternatives available to the Government would have led to greater costs than the result of this tribunal ruling."

Home Office permanent secretary Mark Sedwill has asked the National Audit Office to conduct a full review of eBorders from its inception, she added.

Earlier this year, head of the UK Border Force Sir Charles Montgomery told MPs the troubled scheme had been "terminated" in its current form.