A British man will take the Irish state to court for wrongful arrest this week over the country’s most infamous high-society murder: the killing of French film-maker Sophie Toscan du Plantier at her holiday home in Cork two days before Christmas 1996.

Ian Bailey was first arrested in February 1997, after du Plantier, whose husband was a doyen of the French film industry, was bludgeoned to death with a rock. Bailey had emigrated from Manchester in 1991 to a house nearby to join an international community on the so-called West Cork Riviera, working as a freelance journalist and attracting police attention for his bohemian lifestyle.

Having become a suspect, he persistently protested his innocence and filed a case for wrongful arrest in 2005. A report by the director of public prosecutions compiled in 2001 describes how the Garda paid, and gave drugs to, a British soldier-turned-addict for information on Bailey. Police had urged that “Bailey be charged immediately with this murder as there is every possibility that he will kill again”.

The scathing report called the police case “thoroughly flawed and prejudiced”, concluding that there was “a grossly improper and persistent attempt to achieve a prosecution against Bailey”.

The DPP told police there would not be a prosecution and, in 2002, an internal Garda review confirmed his findings. But his report was kept under wraps for 11 years while police pursued Bailey regardless, encouraged by Bailey’s unsuccessful libel action in 2003 against reporting of the case. “Savage murderer to kill again” ran one headline.

“The libel cases became in effect a backdoor murder prosecution,” Bailey’s lawyer, Frank Buttimer, told the Observer. “By that time the police had been told by the DPP there would not be a prosecution for lack of evidence. But they continued because the DPP was one power in the state and the police are another. Their position was: ‘We don’t give a damn what happened, we’re going to get Bailey’.” Then, in 2005, the Garda’s key witness, Marie Farrell, withdrew her statements and contacted Bailey’s lawyer: this week she will testify for the plaintiff.

The DPP report was forced into the open as Bailey’s lawyers successfully fought off his extradition to France, when a former DPP, Eamonn Barnes, came forward in 2011 with a memo about police corruption he had witnessed on the case. A former chief justice reviewing the extradition appeal, John Murray, said that “if true” the police conduct “strikes at the very heart of the administration of justice in this country”.

Though Bailey avoided extradition, a European warrant remains and he was unable to travel to his mother’s funeral in England last year. “He maintains his life has suffered appallingly by being associated for this appalling crime,” said Buttimer. “He was English, alone here, no one to back him – he was their perfect target.”

The DPP report’s publication coincided with a flurry of other scandals in law enforcement – including police bugging of defence attorney phones and offices – which caused an implosion of An Garda Siochana. It is speculated that among Bailey’s witnesses will be one of the two original whistleblowers who revealed widespread abuse of the speeding points system, allowing politicians, a judge, police officers and a newspaper editor to avoid prosecution thanks to Garda connections.

John Wilson filed for whistleblower status to bring the speeding and other scandals to light, and told the Observer how he had “approached the confidential recipient in the Garda complaints system with evidence that the Garda was continuing to pursue Bailey through the criminal intelligence system as recently as 2012.

“They were collating information on him, tracking him, in such a way as you would a serious criminal, not someone who was framed for a murder he did not commit. They collated him going to university, and trailed his partner too. The information presented to me suggests this was high-level, orchestrated harrassment, yet they failed to investigate the actual murder.” A recent letter to members of the Irish parliament said the Garda had spent 50m Euros pursuing Mr Bailey.

Two reporters have championed Bailey’s case: the late Arnold Kemp of this newspaper and, more recently, the multiple award-winning investigative reporter Gemma O’Doherty, formerly of the Irish Independent.

Last year O’Doherty was forcibly removed from her job after 19 years’ service to the paper, only weeks after she exposed a police commissioner who had speeding points wiped from his licence. At the time she was also working on a number of cases of police corruption, the most notable being that of a priest murdered in 1985 – which was reopened as a result of her work.

O’Doherty is now taking action for wrongful dismissal against the paper – the editor of which had previously been editor of Garda Review, the police internal magazine.

She told the Observer: “Some of the cases I am working on are deeply disturbing, but in the context of these many scandals the Bailey case is as bad as it gets. When innocent Irishmen were arrested in Britain for crimes they did not commit, there was an outpouring of anger in Ireland. But one of the most shocking aspects of this is how many journalists appeared to swallow the Garda line about Bailey. In my opinion, the public have been badly misled.”

A spokeswoman for the justice department said it did not comment on upcoming cases.