The Government has called for an investigation into the sale of a state-of-the-art UK defence technology company to a German rival.

Trade minister Gareth Thomas today slapped a Special Intervention Notice blocking the immediate sale of the Cerberus underwater sonar system created by the Defence boffins at QinetiQ to Germany's Atlas Elektronik - a supplier of detection systems and torpedoes to the German Navy.

Thomas has called in the Office of Fair Trading to investigate "national security concerns" about the sale.

QinetiQ is the former Ministry of Defence research establishment whose privatisation was criticised by many for fears that British military secrets could be sold overseas.

Atlas Elektronik is owned by the German arms supplier Thyssen-Krupp in a joint venture with the German-backed Eads Defence giant.

Cerberus which was developed at QinetiQ's installation on the Dorset coast which employs 220 people, is an ultrasound device to protect naval dockyards, harbours, vessels and submarines from enemy frogmen.

The kit has the ability to detect submerged divers and distinguish them from seals or dolphins or marine flotsam and jetsam.

The technology also has industrial espionage prevention capabilities and has been bought to prevent sabotage or jiggery-pokery between teams keen to know about each others' hull designs in the prestigious Americas Cup yacht event. QinetiQ said it is selling the business for £23.5 million to free up money for investment in the anti-terrorism market where it is selling homeland security technology to the Americans.

The ministerial intervention is the first made into QinetiQ since it was floated by the Labour Government. Other such government interventions have historically been into major transactions.

QinetiQ has been dogged by controversy since its was floated three years ago. Its bosses Sir John Chisholm and Graham Love are reckoned to have made as much as £20 million apiece in the sell-off.

They were strongly criticised by the Commons Public Accounts Committee last year for "profiteering" at the expense of the taxpayer. A spokesman for QinetiQ said today: "We believe this to be a routine referral and that the approvals to the transaction will be given."