A legal challenge by US drug company Perrigo aimed at quashing a €1.64 billion tax assessment raised on it by the Revenue Commissioners will formally open before the High Court on Thursday.

The case, to be heard via video link, involves a “unique and complex” claim by Perrigo that it had a legitimate expectation, as a result of words and conduct of Revenue over some time, that Revenue would not raise such an assessment, the court was told on Wednesday.

Revenue maintains Perrigo owes the €1.64 billion because of its purchase of Irish pharma group Elan in 2013 and the sale by Elan eight months previously of its multiple sclerosis drug Tysabri to Biogen, its partner in the drug's development.

Paul Sreenan SC, for Perrigo, said on Wednesday he will be referring in his opening of the case to a chronology of events relating to dealings with the Revenue over a number of years.

His side will refer to corporation tax returns, assurances of tax compliance, how claims were addressed by Revenue, and other matters resulting in his client having the legitimate expectation contended for, counsel outlined.

He would be referring to law concerning legitimate expectation, unfairness, abuse of power and constitutional rights and would apply that law to the facts of this case.

Mr Justice Denis McDonald said he wanted counsel, during the opening, to identify those parts of Perrigo’s statement of grounds which set out the representations being relied upon to support the claim of legitimate expectation.

Mr Sreenan said this was in many ways “a unique and complex” case in relation to legitimate expectation and that claim was being made not just on the basis of representations but on the conduct of Revenue over time and implied representations.

Intellectual property

The case was essentially that, by words and conduct, Revenue accepted the applicant was engaged in a trade that involved the disposition of intellectual property, he said.

Paul O’Higgins SC, for Revenue, said he was anxious the Revenue affidavits would be comprehensively set out to the court during Mr Sreenan’s opening.

A physical hearing of the case was due to open on Wednesday morning but, at the request of the judge, the sides were asked to take further instructions on whether the case should be heard remotely, via video link.

At 2pm, having been told the sides were agreeable to the case proceeding via remote hearing, the judge directed that would open on Thursday morning.

The judge had earlier expressed concern the numbers in court exceeded by three the 15 maximum number fixed for court number 29 following a Covid-19 health risk assessment. Court 29 is the largest available court in the Four Courts.

Given the case was set down for eight days, involving people being in proximity to each other over that time, it could be done more safely remotely and was particularly suitable for a remote hearing because it involves no oral evidence, the judge said.

The sides expressed reservations about a remote rather than a physical hearing but said they would take instructions.

Password

Following discussions with four journalists in court, an agreement was reached the media would have remote access to a live transcript of the proceedings, with entitlement to have one journalist remaining in court. However, because the case is now to be heard remotely, journalists can access the remote hearing via a password.

Perrigo, in the judicial review proceedings, claims Revenue had no right to raise the assessment and Perrigo had a legitimate expectation it would not do so. It wants the court to make orders quashing the assessment.

Perrigo bought Elan in 2013 by way of corporate inversion, involving foreign companies reversing themselves into Irish businesses to secure an Irish domicile and a lower corporate tax rate.

Because Biogen paid for Tysabri with an upfront sum and the promise of future royalties depending on sales, Revenue says it should have been treated as a capital gain, taxable at 33 per cent.

Perrigo treated it as tradable income in its Irish tax return, subject to a 12.5 per cent tax rate. It maintains this is consistent with how Elan reported the purchase and sale of intellectual property rights to medicines over two decades without challenge by Revenue.

Perrigo claims the Revenue treatment of Elan’s returns meant Perrigo had a “legitimate expectation” as a taxpayer it should be able to account for the Tysabri sale as trading income.