European Union regulators are examining a complaint by ferry group Scandlines accusing Danish authorities of giving billions of euros in illegal state subsidies to state-owned builder Femern A/S to build a tunnel between Denmark and Germany.
The Fehmarn Belt Fixed Link project, due to start next year, will connect the Danish island of Lolland to Fehmarn island on the German side. It consists of a four-lane motorway and a double-track railway which is due to be completed in 2021.
The EU executive can order national authorities to recover state aid if it is deemed to give companies an unfair advantage.
In its complaint to the European Commission, seen by Reuters, Scandlines, owned by private equity investor 3i, said the Danish measures included state loans without a fixed repayment period and various tax benefits.
"All these measures confer a selective advantage upon the companies through state resources, distort competition and affect trade between member states," the complaint said.
Danish authorities were not immediately available to comment.
The European Commission said it was aware of the issue.
"We can confirm that we have received and are assessing this complaint," the EU state aid authority said in a statement.
Reporting by Foo Yun Chee and Ole Mikkelsen