A wrangle over planning permission could damage Northern Ireland's inward investment prospects, according to the UK developer behind Belfast's D5 Harbour Exchange development. The Court of Appeal hearing into the decision to rescind planning permission for the £80 million sterling (€125.06 million) project will be heard next week. But Mr Roger Duckworth, managing director of Anglia & General Developments, said the delay meant that other proposals were on hold.

It is more than five years since the original outline planning application was lodged for the D5 development, to be sited near the City Airport, beside the main Belfast-Bangor road. The plan was for a Sainsbury's supermarket, a flagship B&Q store, a retail warehouse development and a family leisure complex.

Planning permission was granted in February 1998 after a four-week public inquiry, but it was later quashed as the result of a judicial review. Last March, the then Environment Minister, Mr George Howarth, reversed the decision, and gave consent for the project to go ahead. But then in September Mr Howarth's approval was in turn quashed by a High Court ruling.

"The only aspect of the scheme now in dispute is the Sainsbury's foodstore," Mr Duckworth said. "As things stand, Tesco has a monopoly in north Down and east Belfast. I believe that the customer should be given a choice, and that will only come from the competition that Sainsbury's will provide."

But there is strong opposition to the D5 scheme from city centre retailers, and from traders in Holywood, only two miles further out the Bangor road. Mr Frank Caddy, chief executive of Belfast Chamber of Trade, said the proposal contravened the Planning Service's own guidelines.

"Out-of-town developments are already having a detrimental impact on Holywood, which currently has 11 retail properties either vacant, for sale or to let," Mr Caddy said.

The Northern Ireland Assembly has been urged to follow the example set in the Republic, where the Minister for the Environment, Mr Dempsey, will restrict the size of out-of-town centres.

The Northern Ireland Independent Retail Trade Association has said the issue should be top of the agenda in a forthcoming review of planning guidelines. NIIRTA chief executive Mr Bryan Gray said current planning policy should be amended to make it clear that no more out-of-town centre retail developments would be permitted.

There has also been opposition from Mr Keith Shiells, chief executive of the Belfast-based property consultants Lambert Smith Hampton. Mr Shiells said the D5 proposal failed to meet all the criteria in the government's Planning Policy Statement 5 (PPS5).

Mr Shiells said the core principle embodied in PPS5 was that new development should preserve and enhance existing towns and centres. "Development which causes adverse impact on existing centres should be refused," he said.

The appeal, to start next Monday, is expected to last five days and will involve separate appeals by the developers, the Department of the Environment and Belfast Chamber of Trade. The main action has been lodged by the developers, Aquis Estates, Anglia and General and Belfast Harbour Commissioners. The Department of the Environment has tabled an appeal against the court's interpretation of the so-called "complements test". Belfast Chamber of Trade, which welcomed the quashing of planning permission, wants clarification on the conduct of the Planning Service over the original application.

But Mr Duckworth of Anglia & General said the D5 proposals were tested at a four-week public inquiry and examined by planners and ministers, all of whom found in the development's favour.