Canadian taxpayers could be on the hook for $2 million to pay Brian Mulroney's legal fees at the federal inquiry looking into his business relationship with Karlheinz Schreiber.

A Treasury Board policy provides legal assistance to current or former Crown servants, including former prime ministers, to get their full co-operation at commissions of inquiries.

None of the fees, projected to total about $2 million, has yet been paid to the six lawyers representing Mulroney at the inquiry.

Around $800,000 had been budgeted for the fiscal year 2008-2009 and $1.25 million for the fiscal year 2009-2010.

Guy Pratte, Mulroney's lead counsel, told The Canadian Press that payment of Mulroney's legal fees by taxpayers is not unprecedented. The same Treasury Board policy covered the legal tab for Jean Pelletier, the late chief of staff to former prime minister Jean Chrétien, during the Gomery inquiry into the sponsorship scandal, he noted.

Pratte represented Pelletier during that inquiry.

May face other costs

He added that Mulroney may yet wind up out of pocket for some of his legal expenses

It was previously believed that Mulroney was paying for his own legal expenses

Robin Sears, who is heading up Mulroney's public relations team, told The Canadian Press that no effort was made to correct the public record "because the terms and negotiations between the government and the legal team were and remain confidential."

Mulroney wrapped up his testimony Wednesday at the Oliphant inquiry, which is looking into three cash payments Mulroney received from Schreiber at three hotels in Montreal and New York between 1993 and 1994.

Schreiber has said he paid Mulroney $300,000 to lobby domestically on behalf of Thyssen Industries, a German company that wanted to build a light-armoured vehicle plant in Bear Head, N.S., and obtain a contract to sell military vehicles to the Canadian government.

But Mulroney has said he was paid $225,000 in three instalments and that the money was payment for his efforts to promote the vehicles internationally. He has denied it was for any domestic lobbying work, which would have violated Canadian lobbying rules.

With files from The Canadian Press