The National Crime Agency (NCA) will operate in Northern Ireland despite Stormont opposition, the Government declared.
However, the Northern Ireland Executive could be left to foot the bill for some extra functions that will be passed to the PSNI.
The difficulty arises because the SDLP and Sinn Fein joined forces to block a legislative consent motion which would have allowed the body to be set up under the same legislation as in England and Wales. They feared that the new body would establish a parallel police force to the PSNI and one which would be unaccountable to the Policing Board.
They were particularly annoyed by suggestions that the head of the NCA should have the "powers of a constable" which would enable his officers to carry out arrests and some other police functions.
Both the NCA, Justice Minister David Ford and the Home Office believe this is necessary in order to move quickly enough to combat organised crime, which costs the UK some £40bn every year.
Now NCA officers will have the powers of customs and immigration officers. Stormont can't block that because customs and immigration are not devolved matters.
The new plan was spelt out in a written answer to the UUP's Lord Empey, who was among a group of peers briefed by the Secretary of State yesterday morning.
"The Government is disappointed by the Northern Ireland Executive's decision" the written answer said, restating London's commitment to a specialist agency dedicated to fighting "serious, organised and complex crime."
It added: "We will work carefully with the Department of Justice in Northern Ireland to mitigate the operational impact of the Executive's decision. We will be seeking to preserve, as far as we can, the operational relationship between the NCA and the PSNI."
Lord Empey said "the NCA brings specialities from an IT, scientific and intelligence point of view which a regional force like the PSNI doesn't have".
He added: "If the PSNI tried to create those competences within its existing resources they will find it extremely challenging.
"If the PSNI tries to do that I was left in no doubt that it would be a resource burden.
"It would cost us money and it wouldn't be made up from the block grant because police would be taking on a role of their own choice."
There is likely to be a frantic period of negotiation over the next few weeks as the Executive attempts to avoid additional costs without compromising the fight against organised crime too far.
The aim will be to find a way to allow the new body to operate in the same way as its predecessor the Serious and Organised Crime Agency. It may, for example, have PSNI officers seconded to it to make arrests in areas not covered by customs or immigration.
"We have an impasse here and we are going to have to try to get past it" Lord Empey said.
The National Crime Agency is a new FBI-style body formed to fight organised crime across the UK. It replaces the Serious and Organised Crime Agency which already has an office here. It is currently passing through Westminster as part of the Crime and Courts Bill which must be finalised by the end of the month. Nationalist parties at Stormont raised a motion of concern seeking to prevent it from extending here. They argue that it would not be locally accountable.