Fillip for Spurs but Olympic Stadium hopes still distant

Tottenham Hotspur have been granted permission to challenge the decision that awarded the Olympic Stadium to West Ham. A High Court judge yesterday said the north London club, and Leyton Orient, had a case for a full judicial review.

Tottenham argue that a £40m loan West Ham were given by Newham Council to help fund their tenancy of the stadium in Stratford – which lies in Newham – amounts to state aid and so breaches European law. It is on this basis that Mr Justice Collins allowed the case to go to review. He said they had an "arguable" case. It will be heard on 18 October.

It is a fillip to Tottenham as they try to find a new home or develop the area around White Hart Lane, but their chances of eventually taking tenancy of the stadium are still distant. There were overnight reports that the club were considering withdrawing their legal challenge to last year's decision by the Olympic Park Legacy Company to select West Ham as preferred bidders for the stadium. Mayor of London Boris Johnson is set to hand the club about £8m towards developing nearby Northumberland Park, with both the Mayor and Haringey council anxious not to lose the club from an area in desperate need of regeneration, especially in the wake of the riots earlier this month. "They are needed in Tottenham," said David Lammy, the area's MP.

The Northumberland Park development, which would result in a 56,250-seat stadium, will cost around £400m. Moving to the Olympic Stadium remains the cheaper option, and offers appreciably better transport connections, but is opposed by many Tottenham supporters.

There remains a possibility that a deal satisfying all parties will be reached before October, which would then see Tottenham drop their case. The support of the mayor was thought likely to see their legal challenge – which has angered the mayor's office and the government – dropped yesterday. Instead by the afternoon Tottenham's legal team had persuaded Justice Collins they had a case, and it leaves the club in a strong position when it comes to future negotiations with the various London authorities.

Dinah Rose, Tottenham's QC, argued that the future of the £486m Olympic stadium remained of "considerable public importance" and that it must be "lawfully disposed of". Tottenham had been "excluded" by the original bidding process, she said. Newham Council had loaned West Ham £40m as part of a joint bid for the tenancy. Tottenham say that money would not have been made available to West Ham by a bank so it amounts to state aid. Under European law, public money is not allowed to be used to give private companies a competitive advantage. The High Court will now review the decision by Newham to offer the loan, the decision of the OPLC to award the tenancy and the resulting backing received from the mayor and government.

A Department for Culture, Media and Sport spokesman said: "We have noted the judge's decision today. The matter is in the hands of our lawyers."

Barry Hearn, Orient's owner, claims his club will go out of business if West Ham move to Stratford – the stadium is viewable from Orient's ground.

If the review does find in Tottenham's favour the government are then likely to appeal. Even if Tottenham win all legal arguments and the bidding process has to start over, the presence of the running track – which the OPLC and other key bodies are keen to see remain – would still require a drastic change of their initial plans for the stadium.