DURHAM County Council has applied to the High Court for leave to appeal against a legal ruling.
The authority lost a lengthy arbitration battle with Darlington Borough Council and was ordered to pay £2.2m.
But the county council is contesting the arbiter's decision to also award £1.1m in interest, which built up during the past six years.
A dispute between the authorities began in 1997 when Darlington split from the county council as part of a local government shake-up.
The borough council claimed that it was owed £2.2m from a £12m local development fund - a claim backed by the arbiter in London.
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