Transport Secretary Chris Grayling's decision to award contracts to three ferry companies, including one with no ships, under no-deal Brexit plans, is being challenged at the High Court.
Eurotunnel, which operates the Channel Tunnel, says the contracts totalling £108 million were awarded through a "secretive and flawed procurement process".
But the Department for Transport (DfT) argues that the “"extreme urgency" of preparations for Britain's departure from the EU on March 29 justified the process.
At a hearing in London on Monday, Eurotunnel's barrister Daniel Beard QC said the procurement process for "additional capacity for transport of goods across the English Channel" had been "undertaken without any public notice being issued".
Mr Beard said Eurotunnel only found out "when contract notices were published three days after Christmas", adding that it was "quite remarkable" his client had not been informed given its recent history in running cross-Channel services.
He submitted that Eurotunnel was "an operator who actually ran a ferry service three years ago", and was therefore not "speculating" about its ability to run cross-Channel services but "has actually done it".
He also said Eurotunnel had "no knowledge" of the "advanced talks with a number of companies to secure additional freight capacity", which a spokesman for Prime Minister Theresa May said the Government was already engaged in, despite the fact his client had taken legal action.
Mr Beard told Mr Justice Fraser that two of the companies awarded contracts, French firm Brittany Ferries and Danish group DFDS, are already "in the business" of offering cross-Channel services.
He said the third, Seaborne Freight, "apparently intended to do so" before the "collapse" of its contract with the DfT over the weekend.
Seaborne Freight’s £13.8 million contract to run services between Ramsgate and Ostend in Belgium had attracted widespread criticism after it emerged the company had no ships and had never run a Channel service.
The company was also accused of copying part of its website from that of a takeaway firm.
Mr Grayling faced cross-party calls for his resignation late last week after the deal was cancelled.
The DfT said it had decided to terminate the contract after Irish company Arklow Shipping, which had backed Seaborne Freight, stepped away from the deal.
Ewan West, representing Mr Grayling, confirmed to the court that Seaborne Freight’s contract had been terminated.
Mr West added that the procurement process was only for "maritime freight" services and, therefore, Eurotunnel "could never have provided that capacity" and "could not have complied" with the terms of the contracts.
Mr Justice Fraser ruled that an expedited four-day trial will begin on March 1 given the "obvious" urgency of the case and the "very important public interest matters" involved.