Bord Gáis has avoided potential liabilities of about €51 million following a key House of Lords judgment announced yesterday.

The House of Lords has recognised the legitimacy of certain capital allowances claimed as part of a deal between Barclays and Bord Gáis for Ireland's first natural gas interconnector running from Scotland to Ireland. The British Inland Revenue had challenged the allowances involved.

The long-running case has been a source of frustration for Bord Gáis for many years. The company each year has set aside a €51 million contingent liability in its accounts to cover the outcome of the case.

In December 1993, Bord Gáis sold and leased back from Barclays a part of the gas interconnector. As part of the leaseback arrangements, it was agreed that if the capital allowances were not available to Barclays, Bord Gáis would be required to make additional payments under the lease.

According to the company's annual results for 2003, these payments could have amounted to €51 million.

The British Inland Revenue has disputed the capital allowances for many years, and their view was accepted by the British High Court in a decision in July 2002. At the time, Bord Gáis described this decision as "surprising". However, the British Court of Appeal overturned this decision in December 2002.

Bord Gáis welcomed the decision yesterday and said it vindicated its approach.

A spokesman said the company always believed its advice was correct in the case.

The arrangements were entered into with Barclays subsidiary, Barclays Mercantile Business Finance.