The German aircraft manufacturer Dornier-Fairchild has lost a 4.2 million US dollar appeal against the Marshall Islands national airline.
The Majuro Supreme Court says it will uphold an earlier High Court judgment against Dornier which asked it to put a suit against it by Air Marshall Airlines on hold.
The dispute centres on two down payments, totalling 2.1 million dollars, that Air Marshalls made to Dornier for the purchase of two Dornier 328 aircraft in 1999.
The purchase was stopped by Air Marshalls, but Dornier refused to refund the down payment.
Dornier, which is currently undergoing bankruptcy proceedings in Germany, tried to get the Air Marshalls case on hold to allow for arbitration as required by the sale agreement.
The Supreme Court said that the High Court ruled correctly in refusing Dornier's request because the sale agreement was faulty as it was not signed by the airline's authorised representatives and did not have government approval.