Eddie Obeid is trying to head off expulsion from the Labor Party by threatening legal action if it moves against him over allegations he corruptly made tens of millions of dollars from a rigged tender for coalmining licences.

Lawyers for Mr Obeid have written to the party, warning of the move if it proceeds with his expulsion, which was demanded in March by NSW Opposition Leader John Robertson.

Charged with bringing the Labor Party into disrepute: Eddie Obeid. Credit:Kate Geraghty

Mr Obeid, a former Labor minister and powerbroker, has been charged under ALP rules with bringing the party into disrepute.

But he is understood to be denying the charge, despite being the subject of the largest investigation undertaken by the Independent Commission Against Corruption.