A three-man arbitration panel in Japan has ruled unanimously that Nissan was justified in terminating the agreement and has dismissed Mr Botnar's multi-million-pound compensation claim.
The ruling is a further blow to Mr Botnar, who is refusing to return to Britain to face charges of tax fraud and has now been declared a 'fugitive from justice'.
A warrant for his arrest was issued in January last year on charges that he had defrauded the Inland Revenue of more than pounds 100m. The charges followed a raid on Nissan UK's premises in Worthing, West Sussex.
Mr Botnar is living near Geneva and refuses to return to Britain, claiming that he would not get a fair trial. He can live freely there without fear of arrest because there is no extradition treaty between Britain and Switzerland for alleged tax offences.
Two other former directors of Nissan UK and the head of a Scandinavian shipping company also face trial in connection with similar charges.
The arbitration hearings began in March 1992 after Nissan UK lost its argument that the dispute with Nissan of Japan should be heard in the UK courts.
Both the High Court and the Court of Appeal ruled that the case should be resolved by arbitration in Tokyo under the rules of the Japan Commercial Arbitration Association.
According to the arbitration panel's ruling, Nissan was justified in scrapping Mr Botnar's agreement after 22 years because he transferred a 71 per cent stake in the car retailing business to the Union Bank of Switzerland without the Japanese group's consent.
The panel also ruled that the behaviour of Nissan UK in its relations with Nissan of Japan 'constituted a compelling reason for the agreement's termination'.
Mr Botnar built the company into one of Britain's largest privately owned businesses with profits of pounds 65.4m on a turnover of pounds 600m in 1991.
But his relations with Japan began to grow more and more acrimonious, particularly after Nissan opened its UK car plant in 1986, and the two parties ended up in repeated rows over pricing and marketing of Nissan models.
Finally, Nissan of Japan announced in December 1990 that it was giving Mr Botnar a year's notice, citing breaches of their contract, and set about forming its own distribution network.
The former Nissan UK business has now been largely subsumed into a sister company, Automotive Financial Group, which has replaced Nissan with other franchises including Peugeot, Renault, Fiat and Citroen.
A spokesman for Nissan of Japan said: 'We feel this is a very satisfactory result. Although we are entitled to claim damages against Nissan UK we will not do so as we want to get on and run our own business.'
Mr Botnar, who was born in the former East Germany, arrived in Britain in the mid-1960s and set up the Nissan franchise in 1970.
In his first year he sold fewer than 2,000 cars. But he built the business into one of the largest car distributors in the country, selling more than 100,000 a year.
Negotiations to sell the franchise back to Nissan of Japan were held on several occasions in the mid-1980s but the two sides could not reach agreement on price, with Mr Botnar asking for more than pounds 700m.Reuse content