A CLOUD of uncertainty is hanging over a heritage railway after a $3m legal dispute erupted over the biggest event on its calendar – The Polar Express.

Weardale Railway volunteers' efforts could be derailed due to a disagreement between Iowa Pacific Holdings, which owns British American Rail Services, and Rail Events Inc, the company which licences the festive treat, which has proved a big hit with families from across the North-East and beyond.

More than 25,000 tickets for its Polar Express event are sold each year and it is credited with bringing several million pounds into the Weardale economy and creating scores of jobs.

According to sources, it has been alleged Iowa Pacific owes unpaid royalties relating to the festive season events hosted on its railroads in the US and the UK.

When British American Rail Services bought 75 per cent of Weardale Railway in 2008, it was hoped years of uncertainty, during which the County Durham line went bust owing £900,000, had come to an end.

With the help of dedicated volunteers from the Weardale Railway Trust, it brought back daily passenger services for the first time in 60 years and introduced crowd-pulling events such as The Polar Express, a festive train ride inspired by the Warner Bros film.

It is understood the total amount owed is in excess of $3m, with Rail Events seeking payment for unpaid royalties, court costs and other expenses.

Iowa Pacific has reportedly withheld the money over what it believes are unfair practices regarding competition and pricing.

Weardale Railway has released a statement on behalf of its parent company confirming the disagreement.

A spokesperson said: “British American Rail Services Limited, owner of the majority interest in Weardale Railway Community Interest Company has disagreements regarding various contract issues with Railway Events Inc.

“Discussions are ongoing and British American Rail Services is optimistic that a resolution will be reached.”

Rail Events declined to comment.

Kingsley Smith, a former chief executive of Durham County Council who was involved in efforts to revive the railway for many years, said: “The railway is very important for Weardale.

"It is a fantastic tourist attraction, but it also offers longer term possibilities with its links to the mainline. My understanding of the American company that owns it is that they have been very supportive and have developed a first class relationship with the local community and other stakeholders. My own view is that they wouldn’t have entered into this sort of legal argument unless they had a good reason to do so.”

Released in 2004, The Polar Express is an animated Christmas fantasy film based on the 1985 book of the same name by Chris Van Allsburg, and due to is its enduring popularity it is regularly screened on television over the festive period.

Weardale Railway launched its festive ride in 2012, with actors dressed up as the film’s characters greeting travellers and joining them on a half-hour train journey to the North Pole. The passengers, many of whom are dressed in their pyjamas, then enjoy a storytelling session and songs, before Father Christmas hands out presents.

In its first year, the event boosted the Weardale economy by £1m through ticket sales and visitor spend in businesses such as hotels, shops and restaurants. More than 80 seasonal jobs were also created.

The widespread appeal of The Polar Express boosted Weardale Railway’s fortunes and appeared to bring stability after two unsuccessful attempts to relaunch the scenic line. The first, in 2004, ended with the operator going into administration, leaving more than £900,000 owing to creditors which was only ever partially repaid.

In August 2007, 20 months after the relaunch failed, Ealing Community Transport Group invested £100,000 for a 75 per cent stake. Less than a year later, however, it was put up for sale again and Iowa Pacific stepped in with a five-year master plan and an £800,000 investment.