The State is unjustly and unconstitutionally encroaching on the property rights of the health insurance company Bupa by attempting to bring in the risk-equalisation scheme, the High Court was told yesterday.

In continuing legal submissions for Bupa in its challenge to the legality of the scheme, Paul Sreenan SC said the State would face the burden of proving the encroachment of rights was justified.

The State had attempted to justify what it was doing by resorting to academic theory and bringing in concepts such as "death spiral" and "market instability".

If the court was satisfied that Bupa had established there was an unjust and unconstitutional delimitation of its property rights, the State would have to justify that delimitation. If Bupa showed that the introduction of risk equalisation was a hindrance to competition or a hindrance to European treaty freedom, the State would similarly have the task of justifying that.

Yesterday was the third day of the hearing in which Bupa Ireland Ltd and Bupa Insurance Ltd are challenging the legality of the risk-equalisation scheme under Irish and European law.

Bupa is claiming that the imposition of the risk-equalisation charges is an interference with the right to private property under Article 43 of the Constitution.

Bupa also claims that the imposition of the scheme is contrary to Articles 43 and 49 of the EC Treaty because it limits their right of establishment and the freedom to provide services.

The State contends the risk-equalisation scheme is constitutional and in accordance with European law.

The Minister for Health Mary Harney announced on December 23rd last that the scheme would commence on January 1st. Bupa claims it will have liabilities of €161 million over three years and would be forced out of the Irish medical insurance market if the scheme was introduced.

Mr Sreenan has told the court that the scheme, which would involve Bupa paying a subsidy to its main rival VHI to compensate for the VHI having a greater number of high-risk, older and more expensive subscribers, would expose Bupa to losses of €11 million this year.