The Government is to appeal to the Supreme Court a finding that it made an unlawful decision about how €145.5 million in restructuring aid should be allocated following the rationalisation of the European sugar industry and Greencore's withdrawal from sugar production here.

In the High Court yesterday, Mr Justice Frank Clarke was told the Government was appealing against the judge's decision last month granting an application by Greencore to quash the Government decision of July 12th, 2006.

The judge's finding, if upheld, means the Government would have to reconsider the matter in accordance with principles laid down by the court, and recalculate the losses incurred by affected parties.

Last month, Mr Justice Clarke ruled that the losses to be calculated were those resulting from the closure of Greencore's plant at Mallow only, and not the general losses consequent on the restructuring of the sugar industry.

While finding there was a "deliberate decision" by the Government not to offer any compensation to Greencore and prejudgment by the Government of the issue of aid allocation, he rejected Greencore's claim of objective bias on the part of the Government.

The judge also suggested there may be errors or overstatement by Greencore in relation to how it had assessed its own likely losses as a result of the closure of its Mallow plant.

The Government had decided that €47.1 million in 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 €50 million for pension fund requirements and other payments to demonstrate a "sound economic balance" between the elements of the restructuring plan.

Greencore claimed that decision was "fundamentally legally flawed" and breached EU regulations of 2006 adopted to give effect to the reform of the sugar regime.

The Government, it claimed, failed to take into account adequately or at all Greencore's own losses resulting from the major reform of the EU sugar market announced in November 2005, and had wrongly relied on a "flawed" report by consultants Indecon.

The action was brought by Greencore Group plc and Irish Sugar Ltd, trading as Greencore Sugar, against the Government, the Minister for Agriculture, Ireland and the attorney general.