A brother and nephew of Saudi Arabia’s King Abdullah were involved in a scheme to launder millions of dollars, including to the Lebanese militant group Hizbollah, according to a London court claim filed by a former business partner.

Prince Mishal bin Abdulaziz al Saud, a former defence minister, and his son, Prince Abdulaziz, have rejected the allegations as “scandalous and outrageous”. Their lawyers have argued that they amount to a malicious attack on their reputations, and “extortion”.

The allegations stem from a business dispute in the UK courts, which can only be reported openly now after a long battle by the princes’ lawyers to keep the case private on grounds including that exposing it risked shattering relations between Riyadh and its western allies.

The Financial Times and the Guardian opposed arguments for the case to be kept secret and on Thursday won an application for the right to inspect and report on the case and underlying court documents.

Those documents include a series of allegations by Faisal Almhairat, a Jordanian businessman who is battling the princes in court. He alleges that Prince Mishal laundered money for the rich and powerful and was interested in dealing with Hizbollah despite its links to the Iranian regime, a traditional enemy of Saudi Arabia.

Prince Mishal, 86, is the son of the late king Abdulaziz and a senior member of the Saudi royal family. He is chairman of the Allegiance Council, which will preside over the monarchical succession and selection of a new crown prince after the death of King Abdullah, 88.

The legal tussle between the princes and Mr Almhairat is over the governance of FI Call, a British-incorporated joint venture they set up in 2009. In 2011, Global Torch, an FI Call shareholder linked to Prince Abdulaziz, the younger prince, issued a London court claim accusing Mr Almhairat of fraud.

In one legal document, Global Torch claims Mr Almhairat is “a dishonest man with a history of failing to comply with […] business obligations and misappropriating monies from his joint venture partners”.

As part of his legal battle Mr Almhairat, who denies any past wrongdoing, has made a range of allegations against the two princes.

They include that one of their agents bribed UN officials to turn a blind eye to an illicit air cargo of $2bn to Nairobi.

Mr Almhairat also claims he was called in March 2010 by Prince Abdulaziz’s personal secretary, and told to fly to Beirut and issue a $5m bank guarantee on behalf of FI Call to Abdul Razzak in Suleiman bin Ibrahim Almohiesen, who was described as a “major businessman” and friend of Prince Abdulaziz.

Mr Almhairat asserts that when he made independent enquiries about Mr Razzak he was told Mr Razzak was a “well known intermediary for the terrorist organisation Hezbollah (sic) and was known for brokering deals for Hezbollah”.

Mr Almhairat further claims that, when he raised concerns about Mr Razzak with Prince Abdulaziz’s secretary, he received a threatening phone call from the prince himself.

Prince Abdulaziz is alleged to have said that his father, Prince Mishal, was “interested in this deal”.

“I need to show Hizbollah that we can transfer money to them smoothly. They have potentially billions that they want to be transferred,” the younger prince is alleged to have said.

“We deal with whoever we want to deal with, whether it’s Hizbollah, the Mafia or even the Jews,” the younger prince is also alleged to have said.

The princes vehemently deny the allegations. The case continues, with a trial due next year.

The princes are also disputing whether they should be parties to the case at all. Their application challenging the jurisdiction of the English court is due to be heard next week.

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