The Government had no power to "dictate" to Greencore how it should spend some €145.5 million in restructuring aid following Greencore's withdrawal from sugar production here, the High Court was told yesterday.

The Government and Minister for Agriculture had adopted a "fundamentally misconceived" approach as to how EU regulations for rationalisation of the sugar industry should be interpreted, Michael Collins SC, for Greencore, said.

Mr Collins was opening Greencore's proceedings alleging unlawful interference and objective bias by the Government in directing how the company should allocate the €145.5 million in EU restructuring aid.

The case is being heard by Mr Justice Frank Clark, sitting in the Commercial Court, and is listed to run for two weeks.

The action has been brought by Greencore Group plc and Irish Sugar Ltd, trading as Greencore Sugar, against the Government, the Minister for Agriculture and Food, and the Attorney General. The Irish Farmers' Association, as representative of sugar beet growers, and the Machine Contractors Association, are notice parties.

Greencore wants to overturn the Government's decision of July 12th last that some €47.1 million restructuring aid 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" and in breach of EU regulations of 2006 adopted to give effect to the reform of the sugar regime in the EU. It contends the Government 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 relied on a report from economic consultants Indecon.

That report, Mr Collins said yesterday, was based on incorrect assumptions with Indecon, for example, failing to take into account that sugar production would no longer be viable here in the future.

Mr Collins said the issues in the case centred on the interpretation of the relevant European regulations. In adopting the Indecon report, the Government had adopted a misconceived approach as to the interpretation of these. The aid scheme was not designed to compensate growers and contractors for all of the consequences of sugar reform but was designed to address income loss and losses incurred from investing in machinery.

The regulations provided that a minimum of 10 per cent of the restructuring fund should be allocated to growers and contractors but the percentage figure actually allocated in this case was 32 per cent - 27 per cent to growers and the remainder to contractors, he said.

The regulations, he stressed, also provided that sugar processors were entitled to the restructuring fund and this was not dependent on demonstrating losses of income. Processors had to show they had abandoned their sugar quota and decommissioned sugar processing plants.

Greencore also claims it was entitled to first present proposals on how the restructuring aid would be allocated and that the Government's role was to decide if those proposals fell within the scheme of the EU regulations. However, the Government made its decision on how the aid should be allocated on July 12th, more than two weeks before Greencore handed in its own proposals. Greencore claims this meant the Government had effectively, and in breach of regulations, prejudged the issue.

Mr Collins said the Government's role was to approve or reject the proposals. The Government was not entitled to amend it, he argued. The case continues.