CHARITY group Rehab has filed papers in a €1.5bn court action against the State over claims that the running of the National Lottery is uncompetitive and against European law.
The charity, which helps people with disabilities, and sells its own range of scratch cards, lodged papers with the High Court last night.
It is understood that it will seek about €600m in damages relating to loss of revenue due to limits on the sums it can offer as prizes, compared to the National Lottery's multi-million euro jackpots.
It has also been reported that it intends to seek a further €900m for future losses it claims it will suffer from the sale of a new 20-year operating licence for the National Lottery.
The Government announced on Thursday that a consortium comprising of An Post and the British lottery operator Camelot is the preferred bidder for the new contract, having laid down €405m to win the tender.
At present, the An Post National Lottery Company can offer jackpots of several million euro.
However, other organisations such as Rehab are restricted to €20,000-a-week prizes following the introduction of the Charitable Lotteries Scheme (CLS) in 1997.
The Minister for Justice and Equality, An Post National Lottery Company and Ireland and the Attorney General, are the named defendants in papers filed with the High Court last night by Rehab Group and Rehab Lotteries Ltd.
Rehab is seeking declarations that the operation of the National Lottery is illegal and non-compatible with EU treaties.
Rehab recently warned that it would sue the State for losses, due to the National Lottery's dominant market position.
Lawyers for the charity wrote to the Government in June claiming that the State had "limited and distorted" competition for rivals of the National Lottery due to the imposition of the €20,000 prize cap.
Rehab had also sought a judicial review of the Government's decision to phase out the CLS, which also compensated charities subject to the cap in prize money.
Rehab's market share has declined from 25pc prior to the National Lottery's establishment in 1986 to just 1pc.
Rehab refused to comment on the legal action last night.
A spokeswoman for Justice Minister Alan Shatter said: "Rehab is presently engaged in court proceedings and on that basis it would be inappropriate for Minister Shatter to comment."
A spokeswoman for the National Lottery also said it would not be commenting on the legal action.