The long-delayed acquisition of Canada’s biggest telecom carrier, BCE Inc., by the Ontario Teachers Pension Plan and other private equity investors, is on the rocks yet again, as the Royal Bank of Scotland (a major financial backer of the deal) faces political pressure on its ability to lend.

The British government’s proposal to buy shares in a number of major UK financial institutions, including RBS, will likely impose “very strict” banking conditions to shelter tax payers from additional risk in a deeply troubled economic climate. The opposition Conservative Party has said it will only vote in favour of the proposal on this basis.

While BCE’s buyers had an ironclad agreement with RBS and other lenders, legal experts say that they will have great difficulty enforcing this contract if the British government becomes a shareholder in the bank, and seeks to nix the deal.

“We are into a new reality,” said Malcolm Hitching, a banking expert with Herbert Smith LLP, a British law firm. “Regardless of what a contract may say between a bank and a borrower, it may be that there are greater political considerations that have an impact.”

This is just one more example of how costly government bailout plans do more harm than good in a free global marketplace.