The main problem, officials say, is technical. When it first notified Brussels of its intentions, in September 2005, Cyprus used provisions in an EU law that allow for national exemptions from EU rules for reasons of environmental or public health.

"The decision was taken on the grounds that the legal base upon which the Cypriot authorities submitted the notification is subject to certain conditions which do not apply in the case of this draft legislation," the Commission said in a statement.

But the decision did not concern the substance of the Cypriot notification, it said. Cyprus may now resubmit its GMO bill using a different legal basis, scrap the law or press ahead regardless and await legal action from Brussels, officials say.

That last course of action would almost certainly raise the stakes with Washington, which has already hinted at possible action against Cyprus at the World Trade Organization (WTO).

In its letter sent to the Cypriot parliament last July, the United States said the Cypriot draft law was "tantamount to a non-tariff barrier to trade in biotech goods and as such is in violation of your (Cyprus') obligations as a member of the WTO".