In a ruling to be formally announced next week, the Appeal Committee of the House of Lords has unanimously rejected an attempt by 20 defendants to quash UK jurisdiction over the case.
The appellants included former KIO chairman Sheikh Fahad Mohammed Al- Sabah, a member of the Kuwaiti ruling family, former general manager Fouad Jaffar and top Spanish adviser Javier de la Rosa.
The case's outcome is key to the resolution of a long-running Inland Revenue investigation into allegations that the KIO gained more than pounds 600m in illegal tax breaks from the sale of a stake in British Petroleum in the 1980s.
Sources close to the case say the Revenue is unlikely to resolve the affair - which centres on allegations that Kuwait misled the government over the true ownership of the BP shares - until all new information in the civil case is revealed.
The KIO, however, is determined to press ahead despite the dangers of the UK legal "discovery" process.
"This is really an end to challenges over jurisdiction. The plaintiffs are now able to pursue their claim and are determined to do so vigorously," said Andrew Keltie, partner at KIO's lawyers, Baker McKenzie, confirming the House of Lords ruling.
A parallel criminal case in Madrid, alleging misappropriation of up to $1bn from Torras, has been stalled because of Spanish legal wrangling.
Torras, one of Spain's largest industrial companies, which spans chemicals, paper, food and property, collapsed in 1992 with debts of $2.1bn amid allegations of fraud, mismanagement and secret political payments during Iraq's invasion of Kuwait in 1991.Reuse content