The deal to bring rusting toxic US vessels to Teesside for recycling has been blocked by the Environment Agency because of a planning wrangle, a spokesman said today.

The organisation has withdrawn its approval for Able UK's contract with the US authorities to dismantle 13 vessels at its yard in Hartlepool. The vessels are contaminated with chemicals including Polychlorinated Biphenyls, asbestos and heavy diesel.

The agency said it was concerned that planning and environmental requirements for the dry dock dismantling had not been met.

Its prior approval for the deal was on the assumption that the ships would be broken up in a dry dock, which it considered to be environmentally safer.

Craig McGarvey, agency area manager, said: ''The agency's priority is to make sure that the environment is protected and that all the legal requirements are complied with.

''If, in the future, all the environmental and planning requirements are met, there is no reason why dismantling and recovery of ships should not take place at the Able site.''

Four of the 13 vessels in the so-called 'ghost fleet' have already set off from the James River, Virginia, on their 4,000 mile trans-Atlantic journey.

They are due to arrive by the middle of November.

Able UK managing director Peter Stephenson believed all the necessary paperwork would be in place before the ships arrived.

In a statement he said the company had met Environment Agency representatives last night and he was told they would write to him next week with their concerns.

He said it was ''a little surprising'' that the agency had revealed its position in a news release today.

Mr Stephenson said today: ''However, we do remain satisfied that we have relevant planning permissions in place for the recycling of the vessels and the creation of dry dock facilities.

''We have applied for approvals from the Department for the Environment, Food and Rural Affairs in relation to work on the dry dock facilities, covering matters such as dredging.

''Given that similar approvals have been given in the past, we are confident these will be in place by mid-November.''

The recycling deal has been dogged by criticism from environmentalists, who feared the ships were heavily polluted and could break up while at sea.

Local people have expressed concern that Hartlepool was to be used as a dumping ground for US waste and feared pollution could wreck the North East coastline if a vessel was damaged in transit.

But the firm has said the scheme is safe and it will create 200 jobs.

European environment commissioner Margot Wallstrom hoped the scheme would be scuppered by the firm's problems with the agency.

She said: ''I have consistently said that from an environmental perspective, it is a very bad idea to tow the ships over the Atlantic for recycling. It is not a risk worth taking.

''Now I hope these ships can be dealt with on the other side of the Atlantic.''

Friends of the Earth's executive director Tony Juniper said: ''The Environment Agency must now make it clear that the ships must not be allowed to enter UK waters and must send them back to the United States.

''This is a real victory for the environment and for local people on Teesside.

''We are delighted that the agency has realised it exists to protect the environment rather than help America get rid of its waste overseas.''