The Supreme Court has rejected by a 4-3 majority an appeal brought by councils in Liverpool and Sheffield against the allocation of European funding from 2014 to 2020.
Lawyers for Liverpool City Region and Sheffield City Region brought a joint action arguing the reduction was disproportionate compared to other areas.
EU funding is handed down from Brussels to member states, who use their discretion in how they choose to distribute the money.
In a change from the previous seven-year programme, Merseyside lost its special ring-fenced allocation as a historically poorer area. Merseyside's funding tapered down from 2007 to the national average by 2013, the year used to set the allocation for the current round. Lawyers for Merseyside and Sheffield argued this was unfair treatment compared to Northern Ireland and Highlands & Islands, which were on similar transitions programmes in 2007-13 but awarded increases in 2014-20.
The law lords who dismissed the appeal said the matter was political and ministers were allowed to use their own judgment, that the decision had been approved by the European Commission, and that the tapering effect of the last round of funding meant the greater level of funding was not intended to last forever.
The Highlands & Islands will receive around €400 per capita and Northern Ireland €260 compared to €120 in Sheffield and Merseyside. In the last round Merseyside received €380 per person. The total allocation for Merseyside this time is €202m, down from €513m in 2007-13. The local authorities said it should have been €350m this time.
European aid, often awarded through the European Regional Development Fund part of the programme, has been used to pay for the construction of the Arena & Convention Centre, Liverpool Science Park, Liverpool South Parkway train station and many commercial developments which would otherwise have been unviable.
Liverpool Mayor Joe Anderson said: "This is a disappointing result, but it is clear that the legality of the judgement has split the highest judges in the land, which shows that we made the right decision in appealing it.
"We maintain that as Liverpool is one of the most deprived areas in the country, the Government should have fully assessed this to make sure there was no unfair discrimination when making its decision.
"European funding is meant to tackle economic inequality, yet as the poorest area in the North West we were awarded far less funding per head than the rest of the region, including wealthier areas such as Cheshire.
"The bottom line is that the Government took €275m of funding allocated to English regions such as Liverpool and gave it instead to Scotland and Northern Ireland. They dressed this up as protecting them from being disproportionately affected by funding changes, yet the reality is that in percentage terms we have lost twice as much as they stood to lose.
"The Government has played the role of Robin Hood in reverse – taking from the poor to give to the rich.
"I am calling on them to do the right thing and reconsider. But I won't hold my breath."