Arn the Knight Templar, the most expensive production ever made in Scandinavia (budgeted at over $30m) has been a hot item on news wires and the subject of controversy since last Monday when Swedish public broadcaster SVT announced its withdrawal from Svensk Filmindustri's mega-project.

From Swedish best-selling novelist Jan Guillou who wrote the adventures of Swedish crusader Arn Magnusson, to Danish filmmaker Peter Flinth, and financial partners Swedish Film Institute and Danish public broadcaster DR. All expressed their surprise, disbelief, and sometimes anger as most heard about the news via a press statement from SVT's head of Drama, Gunnar Carlsson.

"Unfortunately, SF has not been able to deliver the contents according to the original contract. In addition, the filmed material doesn't have the quality that we were expecting. Therefore, we are forced to put at end to our collaboration with SF", said Carlsson in his official statement.

Just starting its editing phase, the object of controversy is a hugely ambitious European project involving Swedish, Danish, Finnish, Norwegian, UK and German partners. The two feature films and TV series worth SEK 210 m are produced by AB Svensk Filmindustri' s Waldemar Bergendahl, Jan Marnell, Leif Mohlin and executive produced by Johan Mardell. The project is co-produced by Film I Väst, Danmarks Radio, YLE, TV2 Norway, Germany's Telepool (who shares the international sales with SF), the UK's Sheba Films, Dagsljus AB, and ESP with support from the Swedish and Danish film institutes, Nordisk Film & TV Fond, the MEDIA Programme and Eurimages.

The film's stellar cast including Stellan Skårsgård, Vincent Perez, Simon Callow, Sofie Helin, and newcomer Joachim Nätterqvist in the lead role, were in Cannes last May as part of a press-junket to promote the film to international buyers and the press. At the time, Ann-Kristin Westerberg from SF International closed several deals and confirmed that buyers had been impressed by the 10-minutes promo-reel.

Carlsson (who could not be reached for comment) explained to SVT's Text & Web that the broadcaster intended to air the series at Christmas 2009, following the first feature film's theatrical release in Sweden at Christmas 2007 and the second one in the autumn 2008. But SVT was not delivered the extra footage they were expecting and therefore wanted to renegotiate their financial deal with SF.

"There is some truth in Carlsson's statement about the fact that we didn't deliver extra footage", said SF's Johan Mardell to Nordisk Film & TV Fond. "But since April/May, we had been clear about the length of the programme. A public broadcaster doesn't have commercial breaks so the programme delivered has to be longer. We just didn't agree on delivering public service hours and wanted to end the discussions."

The matter over the quality of the material is not an issue for Mardell as the project is just going in the editing room. "For our part, we are very proud of the material we have and are completely confident. We now have to cover with another broadcaster the 10% financing that SVT was supposed to bring, and are seriously talking to several potential investors."

Mardell didn't say yea or nay to the rumours about commercial broadcaster TV4, owned by Bonnier as SF, being the potential white knight, but said that the name of the new broadcaster would be known within 2-3 weeks. "For the film version, everything is going according to plan: We will have a screening for our co-production partners in September and the premiere in Scandinavia will take place as scheduled at the end of the year."