Newby Foods Ltd, based in Newby Wiske, says its business was destroyed when the Food Standards Agency (FSA) "keeled over" under pressure from the European Commission and suspended it from producing its beef and lamb products and reclassified others.
Although the FSA accepted its de-sinewed meat (DSM) carries no health risks whatsoever, it allowed itself to be "bullied" into kowtowing to EU threats that certain British meat products could be banned from European shelves, the company claims.
Yesterday, after a tense hearing at London's High Court, Mr Justice Edwards Stewart came to the company's aid when he indicated that he will send the case off for a definitive decision to be reached by the European Court of Justice. He will give written reasons for that decision at a later date.
The case is now expected to return to the High Court in June when Newby Foods will seek an interim injunction, allowing it to continue trading pending the Luxembourg court's decision - which could take many months to materialise.
Newby says the FSA's "cave in" has cost 40 jobs and more than £5 million in wasted investment.
The company's counsel, Hugh Mercer QC, told the court: "How does it come about that you have a regulator that keels over and accepts the view of a foreign body? It would not do it if it were any other body than the European Commission."
Newby had developed an "innovative mechanised butchery process" whereby meat is removed from butchered bones by friction and then pressed through small holes to remove any bone, gristle or sinew, Mr Mercer told the court. The resulting product, previously approved by the FSA as a "meat preparation", looks like finely minced meat.
But the Commission refuses to recognise it as such and persuaded the FSA to adopt its interpretation of EU regulations. The FSA in April last year imposed a temporary moratorium on Newby producing DSM from beef and lamb bones.
A further order required Newby to label its pork and poultry products as "mechanically separated meat" (MSM) - which is less desirable and valuable because it cannot count towards the meat content of food products.
Mr Mercer told the court: "The effect of the decision was to abolish overnight a substantial portion of Newby's business, which had developed in close co-operation with and express approval of the FSA over many years and led to the investment of nearly £5 million."
The company says it lost £720,000 in the first six weeks after the decision came into effect. Mr Mercer said the FSA's decision to "close down an industry without due process" was unlawful, as was the Commission's interpretation of EU regulations.
However, Clive Lewis QC, for the FSA, insisted the regulator had acted lawfully and the decision brought the UK "into line" with the Commission's stance. He added: "The FSA considered that if the Commission were to seek to impose safeguard measures of any description, that would have a catastrophic effect on the reputation to the UK meat industry."
During the case, Mr Justice Edwards-Stewart, said he was "very sympathetic" to Newby, which has been licensed by the FSA since 2003.