The Goldman Sachs logo is displayed on a post above the floor of the New York Stock Exchange, September 11, 2013. REUTERS/Lucas Jackson Ousted chairman of Libyan Investment Authority challenges London legal proceedings over disputed losses made in Gaddafi era

Libya's billion-dollar lawsuit against Goldman Sachs has been dealt a fresh setback as a power struggle at the top of its $67bn wealth fund sees two rival law firms pitted against each other in the London courts.

The Libyan Investment Authority (LIA), the oil-rich nation’s sovereign wealth fund, is suing Goldman and Societe Generale, the French financial giant, in separate UK lawsuits worth a combined $3.3bn (£2.1bn), claiming the LIA lost billions at the banks’ hands during the Gaddafi era .

However, the fund’s recently ousted chairman, Abdulrahman Benyezza, has launched an attempt to seize power, throwing the future of the case into doubt, as both the LIA and its former leader assert control over the case.

The LIA has appointed solicitors at Keystone Law to take on the case, after its former lawyers, Enyo, walked away from proceedings, as The Telegraph revealed last month .

Mr Benyezza, who was replaced in a boardroom battle in October, has signed up Stephenson Harwood, claiming he was wrongly removed and should have control of the LIA.

The dispute between the two sides means that, in a bizarre turn of events, a British court will decide who has the authority to represent the fund. A direction hearing is expected to be held this week, ahead of full proceedings to establish who is the legitimate representative of the fund.

The LIA is suing Goldman and Societe Generale over losses sustained in the Gaddafi era. EPA The power struggle is a fresh setback to the LIA’s case against Goldman, with the country already locked in violent civil war and under threat from the Islamic State of Iraq and the Levant . The nation’s internationally recognised government has been forced out of Tripoli to Tobruk, in the far east of the country, and the LIA’s board has fled the country for Malta.

In a letter obtained by The Telegraph, from Keystone to Herbert Smith Freehills, which represents both Goldman and SocGen, the lawyers say they “act on behalf of the LIA and are instructed to take over conduct of this action on its behalf”.

“We are aware that Stephenson Harwood have been instructed by others who seek to assert that they are or represent the LIA,” it says. “Given that we are aware of their position, and of their determination to oppose our client’s entitlement to conduct its claims, we consider that filing a new address for service for the LIA would almost certainty be challenged by an alternative filing, and the resulting confusion would not facilitate the orderly conduct of the action.”

The dispute threatens to throw the LIA’s parallel legal battles against Goldman and SocGen, over billions of dollars lost by the fund during the Gaddafi years, into disarray, with the state of the cases now in question if proceedings are required beforehand.

Last year, the LIA filed separate claims against the banks, with the cases scheduled for next year. The LIA says Goldman hoodwinked officials at the fund into investing in derivative transactions they did not understand while pocketing hefty fees, and that SocGen funnelled bribes worth tens of millions to high-ranking individuals close to the Gaddafi government.

When the trades went sour amid the financial crisis in 2008, the LIA lost billions, and it is now attempting to retrieve the money in London’s courts, claiming $1.2bn from Goldman and $2.1bn from the French bank. Witness statements filed by the LIA last year claim that high-ranking Goldman employees took Libyan officials on “lavish” excursions to Morocco, where there was “heavy drinking and girls involved.”

A view of Goldman Sachs at the New York Stock Exchange REUTERS/Brendan McDermid

When contacted by The Telegraph, a spokesman for the LIA said: “Mr Benyezza is a former chairman of the LIA, who was replaced by the board of trustees of the LIA in October 2014, but who now apparently has reappeared and suggests that he still has some status as chairman. This is not the case.

“The House of Representatives Government, the board of trustees, the board of directors and the incumbent chairman of the LIA reject Mr Benyezza’s claims absolutely.”

Goldman Sachs said: “Regardless of who eventually represents LIA, the underlying claims are without merit.” SocGen did not comment.

This article was written by James Titcomb from The Daily Telegraph and was legally licensed through the NewsCred publisher network.