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BMW-Oracle hired investigators to spy on its America's Cup racing rival Alinghi according to court papers filed as a long-running legal dispute heads back to court.

The yachting team funded by software executive Larry Ellison and America's Cup defending champions Alinghi, backed by biotechnology billionaire Ernesto Bertarelli, have been locked in a legal dispute for two years over the 33rd running of the race.

BMW-Oracle, sponsored by the Golden Gate Yacht Club (GGYC), and Swiss team Alinghi, which sails under the colors of Societe Nautique de Geneve (SNG), are due to appear in court again on Thursday after talks broke down.

According to court papers filed by Alinghi on Tuesday, the Golden Gate Yacht Club sent a "team of spies" to illegally break into SNG's facilities and take photographs.

"GGYC's unclean hands further manifested itself in the fact that it hired a team of agents to illegally spy on and try to secure information about the defense boat being designed and constructed by SNG," the papers said.

A spokesman for GGYC dismissed the claims as "trumped-up allegations that have nothing to do with the matter at hand."

"Legal observation of competitors is common practice in the America's Cup and other major sporting events," he said, adding that Alinghi "spies" had participated in similar conduct.

The America's Cup race was originally scheduled for this year. Alinghi had accepted a challenge for the title from Club Nautico Espanol de Vela (CNEV), a Spanish team that had formed as a club just days before submitting its challenge.

But California-based BMW-Oracle contested CNEV's challenge in a lawsuit filed in 2007.

Earlier this year, New York state's highest court, the Court of Appeals, found that Alinghi was wrong to accept the challenge from CNEV.

The court ruling declared BMW-Oracle, financed by Ellison, the chief executive of software giant Oracle Corp, as the official challenger.

Under America's Cup rules, the challenger proposes to race the defending champion and together they plan the terms of the next race.

Reuters