THE GOVERNMENT is trying to block a legal challenge by Greenpeace that could halt oil and gas exploration by companies, including BP, in an environmentally sensitive area of the Atlantic.

The High Court move is the first time New Labour has used the courts to try to 'gag' a public-interest group-and breaks the party's pre-election promise to make it easier for groups to mount legal challenges to potentially damaging activities.

The controversy comes at a sensitive time for the Government, which is engaged in a bitter dispute about European Trade Minister Lord Simon's £2 million of shares in BP.

Tony Blair, who flew to Italy for a holiday yesterday, spent much of last week defending Lord Simon, formerly BP's chairman, against Tory accusations of a conflict of interest.

Greenpeace claims that the oil and gas exploration licences breach European Union directives protecting seabirds and coral reef. It demands that environmental impact assessments are made before licences are issued.

BP, working in the 'Atlantic frontier' area, is one of 22 firms awarded licences. Greenpeace-which last week ended its 48-day occupation of the Atlantic islet of Rockall but is keeping its ship MV Greenpeace in the area- is seeking leave to apply for a judicial review of the Government's granting of the licences in April. If it succeeds the case could go to the European Court and put a stop to exploration for at least two years. If it wins the case, exploration will be stopped permanently. To the astonishment of Greenpeace, the Government has joined forces with the oil companies to try to block the move at its earliest stage, killing a court airing of the environmental objections.

Greenpeace campaign director Sarah Burton, a lawyer, says she was 'amazed' that a Labour Government should try to block a judicial review.

'You might expect it from the Tories, but it is extraordinary that Labour should be trying to prevent these important issues being discussed when they have made a commitment to open decision-making and to public interest groups challenging government decisions.

'The question goes to the heart of democracy. Who has the right to bring issues of public interest to court if the Government fails to do so?'

Greenpeace expected leave to appeal to be granted as a formality. But, faced with opposition from the Government and the oil companies, Lord Justice Tucker ruled last week that the two hours set for the leave hearing was not enough. He ordered a two-day hearing next month for the Government to present its objections.

The Government's case is believed to rest on alleged 'delays' by Greenpeace in making the application, rather than on an environmental defence. But a DTI spokeswoman said: 'We believe we are complying with the EU directives.'

The coral reef in the Atlantic is said to have biodiversity as rich as a tropical rainforest. Greenpeace also claims that exploration will threaten the island of St Kilda, an international bird reserve.

Mr Justice Tucker said the case was 'of considerable importance, high sensitivity and national interest for all parties concerned'.

Before the general election, Labour published In Trust for Tomorrow, the strongest environment policy statement ever produced by a mainstream party.