STV faces £38m bill as ITV turns up the heat in contract feud

STV is being sued for £38 million by ITV in a dispute over the Scottish broadcaster's decision to drop shows such as The Bill and Wuthering Heights.

STV, in turn, believes ITV owes it as much as 40m in unpaid revenues stretching back years.

Relations between the two broadcasters have grown increasingly acrimonious as STV pursues its strategy of opting out of peak-time shows to save money and provide Scottish audiences with new programmes.

ITV, which has been attempting to settle the row for more than a year, said STV was also wrongly attempting to claim a rebate against "written-off" shows, those that were never transmitted.

Under existing agreements, STV pays about 6 per cent of the budget of any network programme it broadcasts, usually 60-70,000 an hour for drama. While STV believes it has the contractual right to opt out of programmes, and not pay the fee, ITV argues this only applies to programmes that STV has specifically named.

In recent months STV has chosen not to screen dramas such as Midsomer Murders, Lewis and Doc Martin, for which it has been criticised by Michael Grade, ITV's chairman.

ITV has begun to withhold other payments to STV, meaning the outstanding net debt now stands at between 15m and 20m. Yesterday, the broadcaster said: "ITV plc regrets to announce that it is today issuing legal proceedings against STV to recover a gross debt of 38m. This debt has accumulated as a result of STV not honouring its contractual contributions.

"STV is attempting, retrospectively, to opt out of an increasing number of peak-time programmes, which contravenes existing agreements. The company is also wrongly attempting to claim a rebate against programmes which have been 'written off'. We are currently withholding monies from STV against this debt and currently believe the net debt is approximately 15m to 20m."

However, STV said: "STV has not yet been served with any claim and is disappointed that ITV has acted in this pre-emptive manner. STV will vigorously defend its position and, in particular, its rights as the licence holder to control its schedule and opt-out of programming in accordance with the devolution contract and the relevant networking arrangements."

The Scottish broadcaster pointed out that this was one of a number of issues between STV and ITV, another of which is a claim against ITV relating to revenues that STV said it should have received under its advertising sales agreement.

Since early 2008, ITV has prevented STV's independent auditor, Deloitte, from carrying out a full review of all revenue-related contracts, which STV insists it has the right to do.