Investment firm Aurelius Capital has begun its challenge to the Government's plans to allow AIB to buy back subordinated debt from bondholders at a substantial discount.
Lawyers for the firm said it appeared a type of 'final solution' had been formulated to get rid of bondholders from the bank.
Aurelius is challenging an order made by the court in April.
The order - called a subordinated liabilities order, or SLO - allowed the terms of certain subordinated bonds to be changed in advance of the buy-back.
Senior counsel, John Gordon, said the act under which the court made the order was an extraordinary piece of legislation.
He said this country had had to have extraordinary legislation in its history - normally in the context of the security of the state.
But, he said, affected parties had always been afforded a fair hearing before the courts and an opportunity to have their say.
He said his clients had no difficulty with the concept of burden-sharing.
He said what they were complaining about was the absence of any consultation process, and the lack of ability to make representations.
He said they were objecting to the use of this legislation not to pursue the objectives of the legislation, but to coerce bondholders into disposing of their holdings for derisible sums of money, unnecessarily.
Mr Gordon said it was entirely inappropriate that this process should be politicised or personalised.
He said there had been a tendency to make denigrating comments about his clients.
He said it did not matter whether the holder of a bond was a pension fund for distressed gentlefolk, or a trust fund for an orphanage or a hedge fund specialising in distressed debt: the rights attached to the bonds were the same no matter who owned them.
He said AIB sold the bonds on the open market knowing they would be traded - that is a fact of commercial life, he said.
Attempts to demonise his clients were an unnecessary and inappropriate distraction.