The Government has no power under EC regulations to "dictate" to Greencore how it should spend some €145.5 million in restructuring aid following the rationalisation of the European sugar industry, the High Court was told today.
In adopting virtually all of the findings of economic consultants Indecon in their report on the consequences of rationalisation of the Irish sugar industry, the government and Minister for Agriculture had adopted a "fundamentally misconceived" approach as to how the EC regulations for rationalisation of the sugar industry should be interpreted, Mr Michael Collins SC, for Greencore, said.
The government had failed, when making its decision in July last year, to even consider the losses to Greencore in relation to assets write offs and income losses into the future as a result of withdrawl from sugar processing, counsel said.
Government has no power to dictate Greencore's €145.5m spending.
The Minister for Agriculture had also directed that Greencore allocate some €37 million to the company's pension fund when there was no evidence the fund was underfunded, counsel said.
There was never any question of the pension fund having ever been inadequately funded, either in the past or now, he stressed.
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 EC restucturing aid.
The case before Mr Justice Frank Clark in the Commercial Court 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, Ireland and the Attorney General.
The Irish Farmers Association, as representative of the 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 and €28.4 million to employee redundancy payments in line with Labour Court recommendations.
It also wants the €20 million it was ordered to allocate to environmental and demolition costs and €50 million for pension fund requirements and other payments overturned.
It claims the Government's decision is "fundamentally legally flawed" and in breach of EC 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 the Indecon report.
That report, Mr Collins said, 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.
It was Greencore's case that it had had no choice but to cease sugar processing in March 2006 as it had no assurances that it would receive enough beet to make processing viable after that date.
Even if sugar processing had continued, Indecon had asessed losses to growers and contractors into the future on the basis that beet prices would remain constant for 12 years although beet prices were falling, counsel added.
The amount allocated to growers from the restructuring fund was a multipe of the levels allocated in other countries and substantially in excess of the amount of €14.5 million recommended by Greencore, the company says.
It had asserted in submissions to the Government that 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. Co Cork and renouncing its sugar quota would be up to €278 million.
It also claims it would suffer a loss of future income of between €206 and €311 million as a result of the cessation of sugar production here.
Mr Collins said the issues in the case centred on the interpretation of the relevant EC 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 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 ten per cent of the restructuruing fund should be allocated to growrers 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, counsel said.
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 is to be allocated and that the Government's role was to decide if those proposals fell within the scheme of the EC regualtions.
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.
The company claims this meant the Government had effectively, and in breach of EC regulations, prejudged the issue.
Greencore submitted its own restructuring plan on July 31st 2006, the last day for submission of restructuring plans.
Mr Collins said the government's role relating to the restructuring plan was to approve it if it met the eligible criteria under the EC regualations or reject it if it did not. The government was not entitled to amend the plan, he argued.
The case continues.