The UK has been threatened with court action because of a failure to disclose financial information relating to public subsidies.
According to the European Commission, the UK has not enacted transparency directive 2005/81/EC into national law, even though this should have been done by December 19th 2006.
The directive is designed to ensure that public subsidies are not spent on commercial activities.
Neelie Kroes, competition commissioner, said: "The UK and Belgium are the only member states that have not complied with their financial transparency obligations and they must do so promptly."
Under Article 226 of the EC treaty, the two nations now have two months to inform the commission of the measures they have taken to implement the directive.
If they fail to do so, they could be taken before the European Court of Justice.
Recently, the EC began a consultation into whether International Standards on Auditing should be used in the European Union.
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