The debts arise from budgets set before Hartlepool College of FE, Longlands (now part of Teesside Tertiary College) and Cleveland Tertiary College quit local authority control in 1993.
Courses for adult returners - particularly women seeking training for work after having a family - were run by the colleges, based on the promise of the European cash. The colleges said that the LEA never passed on the cash but the court rejected their argument.
George Morris, principal of Hartlepool, which must repay Pounds 530,000, told The TES: "Right from the start of incorporation, we kept some money in reserve in case we lost. But the governors are meeting next week to consider appealing. "
Teeside must repay Pounds 625,000 and Cleveland Pounds 235,000.