The State's chief law officer has told the Commercial Court that NAMA was set up in the context of an unprecedented intervention by the State in private financial institutions.

The Attorney General, Senior Counsel Paul Gallagher, said if the banking system had failed it would have had disastrous effects on the stability of the economic system.

He said this was the context in which NAMA was set up and had decided to acquire the loans of property investor Paddy McKillen.

Mr McKillen is challenging the transfer of his loans to NAMA.

Mr Gallagher, who was instrumental in drawing up the NAMA legislation, said there was huge urgency about what NAMA had to do.

He said Mr McKillen's €2bn worth of eligible bank loans could not have been left on the books of the banks.

He said this would have jeopardised the very protection and support of the banking system that NAMA had been mandated to carry out.

Mr Gallagher said this case did not begin when Mr McKillen began proceedings on 1 July 2010, nor did it begin on 21 December 2009, when the NAMA legislation came into force.

He said the context and basis for this case went back to the bank guarantee in 2008.

He said the banks were the conduit through which the economy was preserved.

He said Mr McKillen claimed his long-standing relationships with his banks would be jeopardised by transferring his loans to NAMA.

But Mr Gallagher said that relationship would not still exist if the State had not stepped in to support the institutions. He said you could not look at this case without that context.

Mr Gallagher said the Government had published the proposed NAMA legislation in July 2009.

He asked that if Mr McKillen was so concerned, why had he not taken steps to refinance his loans since then with institutions who were not affected by NAMA.

Mr Gallagher also opened an email from Anglo Irish Bank to Mr McKillen from July this year, which he said painted an entirely different picture of his banking relationship to that which had been set out in court.

In this email the bank complained that Mr McKillen had not engaged with the bank about refinancing loans which had expired.

Mr Gallagher said that Mr McKillen was claiming he was almost unique because his loans were performing.

But he said there was no basis for carving out a separate provision for Mr McKillen to allow him to make representations about the transfer of his loans.

He said by financing long-term investments with short-term loans, Mr McKillen had taken a risk that the loan facilities could have been removed.

He said it was unsustainable to say that because he had decided to structure his business in a certain way, the State could not intervene in the economy on a larger scale.

No attempt to 'strike down' NAMA

Earlier, lawyers for Mr McKillen told the Commercial Court they are not in court to strike down NAMA.

Mr McKillen’s lawyers said he just did not think he or his companies should be dealing with the agency.

Mr McKillen's legal team finished their submissions to the Commercial Court just after 1pm.

Senior Counsel for Mr McKillen, Michael Cush, read out emails that he said showed part of NAMA's incentive to acquire Mr McKillen's €2bn worth of loans was to make a profit.

Mr Cush said at least part of this profit was for the benefit of private shareholders in NAMA.

He also said that a loan of €40m to Mr McKillen by Anglo Irish Bank, which NAMA claims is impaired, was a 'non-recourse loan' on which he had no obligation to make repayments.

This was a loan made to Mr McKillen to buy shares in Anglo in what was known as the 'golden circle' transaction.