The Government may be forced to defend An Post's contract to deliver social welfare payments in the European Court of Justice, following its rejection of a European Commission opinion on the issue.

The Minister for Social and Family Affairs, Ms Coughlan, has written to the Commission claiming that the Government has met all of its obligations on the contract, which has been the subject of an EU investigation for the past three years.

The Commission is arguing that the Government did not adhere to public procurement rules when it awarded the delivery contract to loss-making An Post in 1999 without a tendering process.

The contract, which will be worth about €45 million to An Post this year, would have been of interest to a number of suppliers outside the Republic, the Commission believes.

The Government would maintain its position even if the matter was referred to the European Court of Justice in Luxembourg, Ms Coughlan said yesterday.

It is thought likely that An Post would win the contract even if the Government was compelled to put it to tender.

The current proceedings stem from a complaint made in 1999 by US group, Transaction National Services, which claimed An Post benefited from an illegal subsidy when it was awarded the contract.

The Government has consistently rejected such claims, emphasising the social merit of the arrangement.

Ms Coughlan yesterday praised the "valuable service" provided by An Post in relation to social welfare payments.

"I can assure people that my Department will continue to enable payments through the post office network," she said.

A spokesman for the Commission said Ms Coughlan's letter would be analysed very carefully when it was received.

"If the Irish authorities have conformed with our wishes for them to ensure the correct application of public procurement rules, we shall be very happy," the spokesman added.