Andrew Collins QC, for the Director of Public Prosecutions, said sequestration of the company's assets might be the only way to persuade it to obey a court order brought under the Prevention of Terrorism Act.
Channel 4 and Box Productions, a small television production company, are facing the prospect of sequestration or unlimited fines over the refusal to divulge the sources for 'The Committee', a programme screened in the Dispatches series last October.
The case - which has also brought allegations of threats, unexplained break-ins and attempts by Irish loyalists to recruit a 'mercenary' on the British mainland - is being seen as an important test of journalists' right not to disclose sources. It is the first time sections of the Prevention of Terrorism Act on disclosure of information have been used against journalists.
The television companies argue that to comply would put the lives of the sources and its own programme-makers at risk. It also claims it was in the public interest not to disclose sources because otherwise the programme would never have been made.
Lord Williams QC, for the television companies, said the case was not simply one of journalists defending the right not to divulge their sources because there were other imperatives. 'We will bow the head, but we cannot bend the knee,' he said.
The programme claimed the existence of a secret conspiracy of the security forces, loyalist paramilitaries and senior members of the business and professional classes in Northern Ireland, known as the Ulster Central Co- ordinating Committee.
The group allegedy met to single out IRA terrorists for assassination. Members of the Royal Ulster Constabulary who helped to provide information on the IRA targets were known as the Inner Force. The body was co- ordinated by a shadowy group known as the Inner Circle.
The chief source for the programme - 'Source A' - was a loyalist sympathiser who claimed to be a member of the committee. The companies said they believed disclosure of his name would lay him open to the risk of being murdered as an informer.
In the weeks leading up to transmission of the programme on 2 October, a series of unexplained break-ins, threats and intimidation led Michael Grade, chief executive of Channel 4, to call in the police Special Branch, the court heard.
In May 1991, the television companies heard reports that 'a man feared to be violent' had come over from Northern Ireland to reconnoitre the houses of members of the film production team.
On 17 July, a safe was stolen from a 'facilities house' in London, where the film of the programme was being edited. A few days later a car belonging to one of Box Productions' employees was broken into. On 7 August, there were reports that the 'dangerous man' had returned to mainland Britain.
The following weekend, four men were said to be in the country and 'had recruited a mercenary, an ex-British Army soldier'.
Leading television executives all spent the weekend away from their homes with their families as a security measure.
The reports were accompanied by claims that staff had been followed from their homes, and of threatening letters. One read: 'Beware, your team have been watched and followed. One or more will be hit. Don't tell the police or Channel 4 security.'
Another read: 'The Committee have met. Ben Hamilton (the programme researcher) will be taken out. They will go for the named man. They know who the grass is. They will use him to set up Ben.'
Four Box Productions staff were moved from their homes and rehoused. 'Families were disrupted and children taken from their schools. They still are,' Lord Williams said.
Videos of interviews with 'Source A' were destroyed as a precaution and sensitive material was moved first to a bank safe deposit box and later sent abroad to prevent it falling into the wrong hands.
One Box Productions employee was said to have moved abroad to avoid retaliation.
The television companies said they had done their utmost to comply with a court order made in January, Lord Williams said.
A dossier containing 19 names of alleged members of 'The Committee' was handed to the police in October and contained all but 1 per cent of the information available.
Mr Collins said the order had been made so that police investigations could be made into the allegations made by the programme. The real public interest was to allow police to root out the corruption if it existed.
The television companies could not behave as if they were above the law and should face the consequences if they refused. 'I appreciate what I am saying and what the effect would be. It is difficult to see how we can effect compliance otherwise,' he said.
Lord Justice Woolf and Mr Justice Pill reserved judgment. A decision is expected by Friday.
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