IRELAND's bailed-out banks have objected to the transfer of €5bn of some of the best-performing assets in Ireland and abroad to the National Assets Management Agency (NAMA).
Yesterday, NAMA revealed in the Supreme Court that the final transfer of a number of borrowers' loans to the bad bank were "in suspense" because of the legal action waged against it by property tycoon Paddy McKillen.
The €5bn pool, believed to contain what has been described as "cherry assets" by legal sources, include Mr McKillen's €2.1bn borrowings with Irish banks and have not yet been acquired by NAMA.
Under the NAMA Act, banks, but not borrowers, can trigger a review clause if they believe certain loans or assets should not be transferred to the agency.
The banks objected to the transfer, on grounds of eligibility, of loans belonging to a small cohort of developers whose loans NAMA wants to acquire.
The borrowers are not in the top tranche and their loans are believed to be significantly less than that of Mr McKillen.
It is understood the borrowers pressed the banks to object to the transfer of their loans, claiming they were not "eligible bank assets" as defined in legislation underpinning NAMA.
Yesterday, the Supreme Court rebuffed NAMA and refused to wait until it issued a fresh decision in respect of Mr McKillen's loans before it rules on key constitutional issues raised by the Belfast-born developer.
The full, seven-judge court, will now issue a ruling on whether a right to fair procedures applies to borrowers whose loans NAMA wants to acquire. It is expected to rule on whether the basis on which the agency takes over loans interferes with their constitutional rights to property and to earn a livelihood.
The Supreme Court will also examine two constitutional issues: firstly, whether the NAMA legislation is constitutional if Mr McKillen is entitled to fair procedures, but no such entitlement can be read into the law.
The second issue, and the one being watched closely by other borrowers, is whether the definition of "eligible bank assets" -- assets capable of being transferred to NAMA -- are unconstitutional if Mr McKillen has no right to be heard before his loans are acquired.
Yesterday, NAMA said that in considering Mr McKillen's loans afresh, it would take into account all the material he had placed before the courts, but would not grant him a hearing before NAMA officials.
Last week, a decision to take over Mr McKillen's loans was deemed invalid by the Supreme Court because it was taken by an interim management team a week before the agency was officially established.
It invited both parties to consider whether the remaining constitutional issues should be litigated in light of its ruling.
In a letter written to the Chief State Solicitor's Office last Monday, NAMA said the issues had to be resolved as there would be "serious, ongoing uncertainty" as to the agency's status and powers if they weren't decided by the court.
It asked the Supreme Court to wait until it has carried out a new decision on Mr McKillen before ruling on the issue.
But the Supreme Court said there was no proper basis to adjourn its ruling on the constitutional issues, noting that NAMA retained legal powers to conduct a new decision.
Despite the setback, NAMA is determined to press ahead with a new decision on whether to acquire Mr McKillen's loans.
Yesterday, its legal team told the Supreme Court, led by Chief Justice John L Murray, that a number of loans to other parties are "in suspense" due to the McKillen action which sought to halt the acquisition of his loans.
Senior counsel Maurice Collins, for NAMA, said it had been in contact with the European Commission -- which had set a deadline of February 26 for the completion of all €71bn of transfers -- and anticipated the commission would extend the deadline for the loans in suspense.
Last night, the Department of Finance said the commission had been kept fully informed on the developments.
"All parties want to ensure that the process of the transfer of loans to NAMA is completed as soon as possible, but the commission has accepted that there may be some delay in the transfer of these particular loans," said an official.