The Government could be fined over €10m for not stopping raw sewage from entering our water system.
It poses “a risk to human health and the environment”, the EU Commission said.
The EU reportedly warned the Government in 2005 and again in 2015 that they needed to set up water treatment facilities to meet environmental standards.
The Commission is now planning to prosecute Ireland in the European Court of Justice for failing to implement EU policy.
Irish Water has said that cost of complying with the EU rules could be as high as €1bn.