Any business that wants to make money from a new school could face a long tendering process and public scrutiny

The latest announcement from Michael Gove on the coalition's school plans suggests that businesses could profit from academies.

As he says, Conservatives have no problem with profiteering in the state sector. But he might find that the courts do have a problem with that.

Academies generate controversy among parents and teachers, but they have also given rise to their fair share of legal action.

In a case brought last year by Gillian Chandler, a mother living in Camden, where University College London intends to open an academy, the court of appeal ruled that the agreements to set up academies were exempt from tendering requirements.

Why? Because the European public procurement regime – the cause of the extended tendering processes so disliked by public authorities – does not apply where there is no profit motive.

Academies are established under section 482 of the Education Act 1996, which gives the education secretary the power to enter into a contract with any person, known as a sponsor, who wishes to establish an academy.

The secretary of state can agree to make payments to the sponsor "in consideration of his undertakings", effectively covering his costs, but the sponsor does not make a profit from the school.

One of the reasons academies have caused concern is that the education secretary is not obliged to invite alternative proposals for their establishment in the same way that local authorities do when they set up maintained schools under the Education and Inspections Act 2006.

The creation of an academy too often seems like a secretive process between sponsor and secretary of state that shuts out local communities.

Chandler, whose children were eligible to apply to a new academy in Camden, tried to challenge this process in the court of appeal.

Her case invoked the Public Contracts Regulations 2006, which oblige the secretary of state to follow a tendering process when he contracts out public services.

Her challenge failed after the court – led by Lady Justice Arden – employed esoteric definitions of service providers and public contracts in the European directive to find that the academy contract was "philanthropic" and so not covered by the regulations.

Here lies the problem for Gove: if businesses want to profit from schools, the regulations are likely to apply and sponsors will find themselves entangled in protracted tendering negotiations that open up the academy process to competitors and public scrutiny.

Given that the attraction for many sponsors is discreet access to the education secretary and the quick establishment of their school, the application of the regulations could pose a serious obstacle to the plans for academy domination.

Of course, if the Conservatives are serious about community engagement in schools, they ought to welcome an open process for choosing academy sponsors.

But regard for profit, not transparency, appears to have been the motivation behind this most recent academy initiative.

Elizabeth Prochaska is a barrister at Matrix Chambers