UBS will have to defend itself against a $200 million (£100m) sub-prime lawsuit in the US after losing an attempt to have the case transferred to London.

The Swiss investment bank asked a British judge to hear the dispute, which was filed in New York by HSH Nordbank, a German bank part-owned by JC Flowers, the private equity investor.

In the claim, HSH accuses UBS of “fraudulent acts and wilful breaches of duty” in the management of a $500 million portfolio of debt securities that lost more than half of its value in the credit crisis.

But on Friday Mr Justice Walker at the High Court in London refused to accept the case, saying the references to English law in the original contract were “insufficiently wide” to transfer the proceedings to London. The judge refused UBS permission to appeal because there were “no realistic grounds for success”.

UBS had argued that although it arranged to manage the disputed CDO for HSH in New York under New York law, the complicated group of contracts contained sufficient English law for the case to be heard in London.

The dispute, in which HSH is claiming $200 million in compensation, was one of the first to reach the courts following the collapse of credit markets last summer. Part of HSH’s case is that UBS knowingly used risky subprime mortgage assets in place of better quality debt.

The question of jurisdiction is significant - and worth fighting for - because UBS would have a greater chance of successfully defending itself against the claim in a UK court.

Lawyers said that JP Morgan’s recent success in defending a case against a former client, Springwell Navigation Company, reinforced the prevailing view that the UK courts are a difficult place to successfully litigate against banks.

UBS said: “We note the English High Court's decision not to hear UBS's claims that it has fulfilled all of its obligations to HSH and has committed no wrongdoings.

“UBS continues to believe that the English courts are the proper forum for this dispute and is seeking permission to appeal [direct to the Court of Appeal].”

HSH said it was delighted with the judgment and that its case would continue in New York “where it belongs".

Last month, HSH blamed write downs on credit investments for a 79 per cent drop in first quarter profits to €81 million.

UBS has been the hardest hit of all European banks with more than €30 billion of credit crisis-related losses so far. Last week the bank confirmed that figure would grow but declined to give further details.

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