The Commercial Court has begun hearing a challenge by a major developer to the National Assets Management Agency.

Paddy McKillen is challenging the transfer of €80m of loans from Bank of Ireland to NAMA.

The case is being heard by three judges presided over by High Court President Mr Justice Nicholas Kearns.

NAMA's legal team is being led by Attorney General Paul Gallagher, a measure of how seriously the case is being viewed by the State.

Opening the case for Mr McKillen, Senior Counsel Michael Cush said his client was not asking the court to decide if NAMA was a good or bad idea or a good or efficient model to deal with the State's difficulties.

Mr Cush said he was not asking the court to rule on the merits of NAMA's decision to acquire Mr McKillen's loans or to rule on the merits of NAMA acquiring unimpaired loans.

He said he was not asking the court either to rule on the valuations of assets or on whether Mr McKillen's loans constituted a systemic risk to the banking system.

Mr Cush said Mr McKillen was basing his case on five issues.

He said the procedures adopted by NAMA in its interpretation of the act were a denial of Mr McKillen's constitutional right to fair procedures.

Mr Cush said NAMA failed to have regard to relevant considerations when exercising its discretion to acquire Mr McKillen's loans.

He said the decision to acquire the loans was taken before the establishment of NAMA and was therefore null and void and of no effect.

He said under a correct interpretation of the European Commission's decision approving NAMA, at least some of a borrower's loans must be impaired before they can be acquired by NAMA.

Mr McKillen's final point is that if he is wrong on these issues, then the legislation itself is so broad that it is unconstitutional.

Mr Cush said Mr McKillen owned or had an interest in a property portfolio worth between €1.7bn and €2.28bn.

He said he had loans with the banks participating in NAMA to a value of €2.1bn.

But he said all loan repayments were being made and he said the income generated by Mr McKillen's 62 properties was 1.7 times the sum required to meet interest repayments.

Mr Cush said this was an excellent figure, particularly in the current climate.

He said the properties brought in an income of €150m per annum and were 96% let, mainly to blue chip tenants for 25-year leases.

He said the property portfolio was geographically spread, with 26% of the properties based in Ireland and the balance in the UK, France and the USA.

Only a very small proportion of the loans, he said, could be described as land and development loans.

Mr Cush said Mr McKillen was of the firm belief that the acquisition of his loans by NAMA would cause significant adverse effects on him and on his companies' financial wellbeing.

He said it was not in Mr McKillen's nature to bring an action of this nature at this time, were it not for his absolute conviction about these adverse effects and his absolute conviction that he has been treated unfairly.

The State argues that the challenge is a very real threat to the vital work of NAMA and is of enormous economic significance.

It says five banks participating in NAMA have an exposure of €2bn in total to Mr McKillen.

The case is expected to take two weeks.