Investors fighting for greater compensation following the collapse of London Capital & Finance have been given the green light for their judicial review of the Financial Services Compensation Scheme.
The bondholders launched the review in March this year but have now received the go ahead for the case to be heard in court after an attempt to have the case dismissed by the lifeboat body was refused.
The judicial review comes as bondholders fight for greater compensation from the FSCS, an issue of much debate over the past year with mini-bonds falling outside the scheme as unregulated investments.
The claimants in the case are hoping to see the compensation decision made by the FSCS quashed and the eligibility for investors broadened as a result of the review.
The lifeboat body has already paid millions in compensation to those London Capital & Finance investors it believes received misleading advice from the scandal-embroiled mini-bond provider.
Last month the FSCS revealed it had paid more than £20m in compensation to bondholders and issued 1,295 decisions after increasing the size of its team working on the case by almost 80 per cent.
The FSCS levy to be shouldered by advisers this year increased by £16m to £229m predominantly as a result of the scandal.
Thomas Donegan, partner at law firm Shearman & Sterling, which is representing investors on a pro-bono basis, said: "We are very pleased that the court has given permission for this important case to be heard and that the investors' quest for justice and recompense will continue.
"We feel confident in our arguments and look forward to presenting them to the court."
Jonathan Swil, counsel at Shearman & Sterling, said the claimants now had the opportunity to let the court decide "on the legality" of the FSCS decision which had "left them without compensation".
Earlier this year the FSCS announced it would not seek to enforce any costs order against the investors brining the judicial review, meaning if bondholders lost the case the lifeboat body would not recover legal costs from the group.
At the time Shearman & Sterling said the case was only possible because the FSCS agreed each party should pay their own costs regardless of the outcome.
Otherwise the four claimants would personally bear the risk of the lifeboat-body's legal fees if the case was unsuccessful.
James Darbyshire, interim chief counsel at the FSCS, said: "FSCS acknowledges the court’s decision that part of our approach to London Capital & Finance claims will be judicially reviewed.
"We have always acknowledged that the failure of LCF involves complex legal and regulatory issues - those issues will now be considered in detail by the court.
"FSCS is sympathetic to the situation in which LCF investors have found themselves and remains transparent and cooperative in discussing the issues with them."
LCF fell into administration in January 2019 owing more than £230m and putting the funds of more than 14,000 bondholders at risk.