A landmark legal challenge to stop the SNP Government's controversial policy of enabling Scottish universities to charge English students up to £9000 a year in tuition fees while home students pay nothing has collapsed.

The planned petition for judicial review at the Court of Session in Edinburgh by the Birmingham-based practice, Public Interest Lawyers (Pil), on behalf of two clients, has failed before legal arguments could even be put.

Liam O'Connor: I'm simply asking not to be discriminated against

After months of trying, the two students hoping to raise the action were unable to get legal aid from the Scottish Legal Aid Board because of a legal technicality and, given they are both students without the financial means to contest a potentially lengthy and costly legal battle, their challenge has fallen through.

A spokesman for Pil told The Herald: "Unfortunately, we won't be able to take the matter further. It's a great shame.

"We were of the opinion we had good arguments for the court to consider, but we can't get legal aid for our clients and we have an obligation to consider their position first and foremost."

One of the clients, 23-year-old Liam O'Connor from Derbyshire, said: "I am extremely disappointed. It feels like we have downed our weapons without a shot being fired. It's a real shame and a scandal such an important thing can fall through on the basis of a technicality and a lack of money. It seems such an arbitrary decision.

"We were told the only way we could go forward was to take the risk of incurring the costs of the Scottish Government, which could run into tens of thousands of pounds if we lost. I have enough debt as it is without paying the legal costs of the Scottish Government."

Mr O'Connor, who is in his final year of a politics degree at Strathclyde University, began his battle two years ago because he felt the SNP Government had introduced a system that was unfair to, and discriminatory against, students from England, Wales and Northern Ireland. Under the Scottish Government system, Scottish students and those from EU member states outwith the UK have their fees paid by Holyrood.

Mr O'Connor said: "It's nothing to do with nationalism or xenophobia or wanting to stick it to the Scottish Government. I have lived in Scotland for four years. I just don't want to feel discriminated against.

"I have an EU passport but I feel myself, other people from England, Wales and Northern Ireland have been unfairly discriminated against because we have to pay fees when others don't."

The issue of the SNP Government's tuition fees policy has sparked controversy, particularly south of the Border, with some critics branding it "fees apartheid".

A number of Scottish universities charge the full £9000 a year while some cap a four-year charge at £27,000.

European law makes clear students from EU members states cannot be offered a worse deal than home ones. However, the devolved settlement has led to Holyrood allowing Scottish universities to charge English, Welsh and Northern Irish students fees.

Phil Shiner, the leading lawyer at Pil, said last year: "A responsible Scottish Government ought to safeguard its higher education system in a proportionate and fair way."

Last night, a spokeswoman for the Scottish Government said: "The case was clearly invalid because tuition fee arrangements are based on where you live not nationality.

"The Scottish Government ensures that undergraduates who live in Scotland and are studying in Scotland pay no tuition fees – it is Westminster which refuses to pay for students who live in England."

The spokeswoman added: "The UK Government's actions to hike tuition fees in England meant action was needed to ensure continued access to Scottish universities for Scottish-based students. However, the situation where students from other parts of the UK pay fees in Scotland and EU students do not has been in place for well over a decade."