Liverpool has been given the go-ahead to be granted "turnaround status" for cruises to start and end in the city to the dismay of rival port Southampton.
The ruling from the Department for Transport depends on Liverpool City Council repaying £8.8 million of a £20 million grant which it was given for its current stop-off terminal at the Pier Head.
Liverpool was allowed to build a cruise terminal in 2007 with public funding from the UK government and Europe on the proviso that it was only used for stop-offs by cruise ships and not turnarounds.
Work began in March on a temporary baggage and customs building at the Pier Head, and shipping minister Mike Penning has now given his approval to the status change.
Rival port Southampton had argued it would be unfair to change the status in the face of a long-running campaign by Liverpool unless it paid back the grant in full.
But Penning said: "I have now received this advice and have decided to accept the recommended figure of £8.8 million as a lump sum repayment or a total of £12.6 million if phased over 15 years.
"In my view this represents a fair outcome that addresses competition concerns while enhancing the benefits to secure which the grants were initially paid."
Southampton port director Doug Morrison, of Associated British Ports, said Liverpool should have to repay the entire £20 million subsidy it received before being given clearance for turnaround cruises.
"We object to the taxpayer giving a rival port a helping hand," he said. "The taxpayer should be asking - why are they not building their own port terminal like us? It's about being fair and this is obviously unfair."
Penning is urging the European Commission to also clear the agreement.
The council is leasing a temporary building on Princes Parade during the cruise season from 2012 to 2015 while it determines whether to build a permanent site.
Chancellor George Osborne said: "As a North West MP, I have heard and seen how important this issue is and I am glad the government has delivered for Liverpool.
"I am pleased that the decision will allow cruises to start and finish in the city's port. I look forward to new jobs and investment, along with liners on the Mersey."
John Cooper, head of sales and marketing at Liverpool Cruise Club, told the BBC: "We've got, at the moment, a couple of small cruise line ships coming in and that is just the start.
"We've got to make sure that those ships go out full, and the reason behind that is that once the big liners see that happening, they need to fill their ships and they'll be in here like a shot."
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