A mysterious investment in the Evening Standard and Independent will not be investigated on public interest grounds after a court ruled that the government had missed a deadline to intervene, despite claims the financial backer has “strong links to the Saudi Arabian state”.

In June the government said it wished to investigate the sale of substantial stakes in the two titles, controlled by the Russian Evgeny Lebedev, to offshore Cayman Islands companies fronted by a little-known Saudi businessman. It was claimed in court that the companies were ultimately part-owned by a Saudi bank with close ties to the government.

Jeremy Wright, the former culture secretary, claimed there was reason to believe the Saudi investment “may have an effect on the Evening Standard and the Independent’s news agendas” and referred the case to the Competition and Markets Authority on public interest grounds.

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However, lawyers for Lebedev’s news outlets successfully blocked the referral. Judges at the Competition Appeals Tribunal ruled that although the government followed the law in raising the public interest concerns about the transactions, it was too late to formally intervene.

A government spokesperson said they were disappointed by the court’s ruling and would “study the judgement carefully” before deciding whether to seek an appeal, which would need to be requested by 6 September.

Deciding whether to pursue the case will be one of the first major tests for new culture secretary Nicky Morgan, in a political sensitive area. She used to work in the Treasury alongside former chancellor George Osborne – who now works for Lebedev as editor of the Evening Standard.

In addition, Morgan was last month appointed to her current job by prime minister Boris Johnson, who has attended parties held at Lebedev’s Italian mansion.

The British government’s legal representatives had argued that the series of “unconventional, complex and clandestine” deals involved in the Saudi investment could affect freedom of expression at the news outlets.

“What is of concern to Her Majesty’s government is that a foreign state could be acquiring a substantial stake in Lebedev Holdings [the owner of the Evening Standard] and the Independent simultaneously,” said the government’s lawyer in a hearing last month.

Lebedev’s lawyers did not directly address the government’s suggestion that the Saudi state could now control a stake in the two news outlets and told a court they knew very little about the individual who was fronting the various companies.

Instead, the case dealt with narrow issues of competition law. The judges ruled that while it was legitimate for the government to have issued an intention to intervene, the final referral should have been made by 1 July.

A spokesperson for the news outlets said they were delighted by the outcome and that the intervention had been “disproportionate to the facts, unfair and a waste of public money”.

“There are no public interest concerns arising from these investments as editorial independence and freedom of expression have always been, and continue to be, critical to our publications. We have no further comment to make.”

Since the investment was made the Independent has launched a range of foreign-language websites run by a Saudi publisher that uses its name, raising concerns about editorial oversight given the Middle Eastern kingdom’s poor record on press freedom.