Cybersquatters from Latin America have taken over London, Paris and Dublin. And a virtual landgrabber from Milton Keynes has moved in on Leeds, Liverpool and Manchester.

The allocation of .eu domain names has descended into fierce controversy less than a week after the Brussels-based EURid registry launched the European internet naming system. One senior web figure has accused the Brussels officials of "grand manipulation and lax administration", as European companies with trademark names and even some of Europe's biggest capital cities have had potential .eu domains snatched from them in a cyberspace land grab.

In one case, a New York-based company is believed to have managed to register at least 350 .eu names.

The launch of the .eu domain name system was supposed to be different from those, like .com or .co.uk, that had come before, and was created with the knowledge that the internet is no longer just a plaything for techies, but a crucial communications medium supporting a multi-billion pound global industry.

To remove the risk of cybersquatting - where speculators register names they know to be registered trademarks of a third party - or land grabbing - where speculators register generic domain names and then sell them on for exorbitant fees - the EU domain registry launched the system with a "sunrise" period during which European companies with existing trademarks or prior rights to a name were able to register their chosen .eu domain names. Official bodies, such as local government, were supposed to be given priority.

This sunrise period ended on Friday, when the .eu system then opened up to general registrations. Only now is it emerging that despite EURid's best intentions, hundreds of trademarked names have been allowed to be registered as domains by companies that are not even based in Europe. This development has been greeted with fury by some British companies, who after being denied their trademarked domain names have told Times Online that they are considering legal action against EURid.

"Europe’s .eu domain is being hijacked," Bob Parsons, the chief executive of Go Daddy, one of the largest American domain registrars, said today in his influential weblog.

"What happens when you match an inept registry with crafty businessmen? The answer is a really large scam."

Mr Parsons claims that hundreds of "phantom" registrars, backed by what he calls "North American multi-millionaires", were established to take advantage of a lax system and claim .eu domains.

In an embarrassing twist for EU officials who oversaw the process, even the capital cities of member states have discovered that the .eu domains that they had expected to register have been allocated to companies outside Europe.

In theory, dublin.eu ought be in the possession of either the Dublin tourist board or the city council, both of which clearly have prior rights to the name. But "Dublin" has also been registered as the trademark of the Lantec Corporation, who list a Paris address (as you must be based within the European Union to register a .eu domain), but who can be traced back to a company that is based in Dominica.

Lantec holds a Benelux trademark for "Dublin", issued on December 1, 2005. Six days later, they applied for the dublin.eu domain name under the sunrise system.

Lantec is also in pole position to gain the london.eu domain name ahead of another squatting outfit, Traffic Web Holding BV, which claims the Benelux trademark "lon&on". In the queue for london.eu, the Greater London Authority finds itself only in third place and unlikely to gain the domain name as it submitted its claim to the name 20 hours after Lantec.

Peter Murphy, the GLA's web manager, told Times Online: "There's a loophole and it is clearly something that's been exploited by people who in normal circumstances probably wouldn't have a legitimate claim."

The GLA has yet to make a decision on whether to take legal action, but it seems likely that a number of local authorities throughout Europe may group together to lodge their complants. "There's been e-mails flying all over local government circles," Mr Murphy said. "Lots of people have been beaten in the queue."

Local authorities' disquiet is unlikely to be helped by inconsistencies in the way EU regulations have been applied. EC regulation 874/2004 required EURid to reserve the country names of member states. For example, the British government can claim the right to Britain.eu.

This seems to have been applied to some city names, but not others. Berlin.eu is reserved for "member state Germany", as are the capitals of Belgium, Luxemburg and Spain, while every other EU capital has failed to be reserved.

The decision on whether to pursue legal action will depend on the number of cities that do decide to use .eu names as their official websites. "If so many city names were taken by cybersquatters, then it would devalue the ownership of london.eu." Mr Murphy said.

"If it's the case that so many names have gone to cybersquatters then clearly it questions the whole purpose of trying to protect the interests of public bodies, agencies and trademark holders through offer a sunrise period."

Stephen Stock, a businessman from Milton Keynes, took out Benelux trademarks on Birmingham, Manchester, Leeds and Liverpool in order to register their .eu domains. "I'm just one tiny little person. If I hadn't grabbed the names, someone else would have," he told Times Online.

EURid has rejected any claims of mismanagement. "Each registrar had to show us proof of the company registration," a EURid spokesman told The Register.com.

EURid says it has registered 1.7 million domains so far, making it the seventh largest registry on the worldwide web.

'Mass panic' as .eu domain deadline falls

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