Ravenscraig as it was before being closed and demolished

Plans for the 1,100-acre site include 3,500 houses, an industrial park and a large retail centre.

However, two firms which own shopping centres in nearby Hamilton and East Kilbride have raised a legal challenge.

Standard Life and Land Securities are worried about the effect a new shopping centre would have on those towns.

The hearing at the Court of Session is expected to last several days and the outcome should be known later in the autumn.

The British Steel works at Ravenscraig shut in 1992 and the site was cleared four years later.

North Lanarkshire Council wants to build a �1bn new town to regenerate the site, which was once an icon of Scottish industry.

'Town centre' status

In November 2003, the Scottish Executive granted a decision to approve an alteration to the Structure Plan for North Lanarkshire which gave "town centre" status to Ravenscraig.

Standard Life and Land Securities lodged appeals at the Court of Session against the alteration of the Structure Plan.

In March this year, North Lanarkshire Council gave the Ravenscraig development planning permission but in July, a judge overturned that decision, saying that the authority should not have made such a move while the companies' appeal was pending.

Ravenscraig was closed in 1992 and demolished four years later

Standard Life Investments and Land Securities believe that permission for about one million square feet of leisure and retail space would severely undermine the existing retail centres of Hamilton and East Kilbride.

Normally, developments such as Ravenscraig would be blocked by planning guidelines stating that new retail and leisure developments should be within town centres.

The guidelines were introduced to protect town centre shops from huge out-of-town developments.

However, by designating the Ravenscraig site as a "town centre", this objection fell away.

It is this "town centre" designation which the two firms are challenging.

Ailsa Wilson, representing Scottish ministers, told lords Kirkwood and Marnoch and Lady Cosgrove that objections centred on the amount of retail space.

She said: "This challenge is concerned with the validity of the approach taken by Scottish ministers to this evaluation of this retail proposal and also the proposed policy approach to treating a non-existing town centre as though it is an existing town centre."

However, Miss Wilson said there would be support for existing town centres near the new development to manage any adverse impact.

She said: "It is the position of the appellant that retail developments of this scale will have adverse impacts on the town centres of East Kilbride and Hamilton, both being Lanarkshire towns.