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Developer's challenge to Nama tests its power

THE future of Nama, the state agency set up to cleanse the banks' balance sheets of many of their loans to developers, will be to the fore this week as a constitutional challenge to its operation gets under way in the High Court on Tuesday.

Belfast-born developer Paddy McKillen and 15 of his companies are challenging Nama on a number of legal issues.

Chief among the famously secretive tycoon's objections to the State's so-called 'bad bank' is that it is seeking to take over his development loans in spite of his assertion that he is an unimpaired borrower.

Mr McKillen -- who has already had an €80m loan with Bank of Ireland transferred into Nama -- claims that the newly established agency is violating his property rights under the Constitution.

Mr McKillen, who is perhaps best known in Ireland as the developer of the Jervis Centre in Dublin, has also claimed in affidavits -- submitted to the court in advance of the case -- that having to deal with Nama will affect his business reputation and ability to raise funds internationally.

Defending its treatment of Mr McKillen, Nama told the High Court two weeks ago that the case presented a "very real threat" to its vital work.

The agency also claimed that Mr McKillen's debts potentially posed a systemic risk to the Irish economy and the banking system, were he to encounter difficulty in repaying his loans.

Such is the seriousness of Mr McKillen's legal challenge that a three-judge divisional court of the High Court has been set up to hear the case, which is expected to run for two weeks.

A number of internationally renowned and respected experts have already provided written statements to the court in support of Mr McKillen's legal action, including the Nobel Prize-winning economist, Professor Joseph Stiglitz.

Prof Stiglitz, who served as chief economist and senior vice-president of the World Bank between 1997 and 2000, is among nine witnesses to file such statements.

Nama, for its part, has submitted affidavits in support of its defence in the case from Trinity College economists, Philip Lane and Dermot McAleese.

In the past, Mr McKillen has been known for his ability to avoid the media spotlight but his constitutional challenge will be watched closely at home and abroad.

The entrepreneur has extensive property interests and significant stakes in several well-known retailers.

The legal action is set to run for two weeks. Mr Justice Frank Clarke was told at a previous hearing that the evidence would be "more substantial" than had been previously thought.

Sunday Independent