Greencore has brought High Court proceedings against the Government alleging unlawful interference and objective bias in directing how the company should allocate some €145.5 million in EU restructuring aid, following the rationalisation of the European sugar industry and Greencore's withdrawal from sugar production here.

Greencore says it was "appalled" by the Government's decision of July 12th that some €47.1 million restructuring aid should go to sugar beet farmers and contractors, €28.4 million to employee redundancy payments in line with Labour Court recommendations, €20 million for environmental and demolition costs and some €50 million for pension fund requirements and other payments in order to demonstrate a "sound economic balance" between the elements of the restructuring plan.

It claims the Government's decision is "fundamentally legally flawed", in breach of relevant EU regulations adopted to give effect to the reform of the sugar regime in the EU and is, consequently, of no legal force or effect. It also claims part of the decision is unconstitutional.

The government had failed to take into account adequately - or at all - Greencore's losses resulting from the major reform of the EU sugar market announced in November 2005, Mr Paul Sreenan SC, for the company, said. It had relied on a study prepared by economic consultants Indecon which, counsel argued, had failed to take into account that sugar production would no longer be viable here in the future due to the severe restructuring of the EU sugar industry. The amount allocated to growers from the restructuring fund was a multiple of the levels allocated in other countries and substantially in excess of the amount of €14.5 million recommended by Greencore, the company said.

Greencore had asserted in submissions to the Government it was entitled to some 90 per cent of the restructuring fund for Ireland and that the costs and obligations it would incur as a direct consequence of ceasing production at Mallow and renouncing its sugar quota would be up to €278 million. It also claimed it would suffer a loss of future income of €206-€311 million as a result of the cessation of sugar production.

Greencore claims it is for the company itself to first present proposals on how the restructuring aid is to be allocated and that the July 12th decision by the Government effectively ordered the company what to do and prejudged the issue prior to Greencore's submission of its own restructuring plan.

The company says it will go ahead and present that plan by the deadline of Monday, July 31st, and that the Government has a limited and strictly regulated input into that plan. In its handing of the matter, the Government has breached various EU regulations and discriminated against Greencore, the company claims.

Mr Justice Peter Kelly yesterday granted leave to Greencore Group plc and Irish Sugar Ltd, trading as Greencore Sugar, to bring judicial review proceedings against the Government, the Minister for Agriculture and Food, Ireland and the Attorney General, arising from the Government's approach to the allocation of the restructuring aid.

He returned the matter to Monday and also granted leave to Mr Sreenan, with Mr David Barniville BL, to apply that same day to have the case admitted to the Commercial Court list of the High Court.

The judge further directed that the Irish Farmers Association, as representative of the sugar beet growers, and the Machine Contractors Association should be joined as notice parties to the action as the court's decision relating to the €47.1 million package would directly affect the growers and contractors.

In granting leave, the judge observed Greencore is challenging a decision by the government of July 12th allocating to sugar beet growers and contractors 32.38 per cent of €47.1 million of restructuring aid made available by the EU.

He said there was a complicated legislative background to the case involving several EU regulations. The challenge was being brought under a number of different headings. It was claimed the Government's decision was in excess of its powers under the EU regulations and was afflicted by objective bias and prejudgment of the issue.

It was also claimed the Government was not entitled to come to the decision it had reached and that the High Court should quash that decision.

In order to secure leave to bring judicial review proceedings, a party had to show it had an arguable case for trial, the judge said. He was satisfied, having had a brief opportunity to examine the statement of grounds, the affidavit by Greencore chief executive David Dilger and having regard to the EU regulations in question, that Greencore had achieved that standard of proof and he would grant leave.