DUBAI: A court in the United Arab Emirates has ruled that local energy firm Dana Gas can distribute dividends to its shareholders, contradicting an earlier decision by a British court, according to court documents published on Wednesday.

The ruling is the latest move in a legal battle in the UAE and Britain which began last year, when Dana halted payments on its $700 million of Islamic bonds. The company argues the sukuk have become unlawful because of changes in Islamic finance; holders of the sukuk contest that and are demanding to be paid.

Dana said late last month that it would seek shareholder approval to pay a cash dividend for 2017, its first in several years. The dividend would be worth 5 percent of capital or about 349 million dirhams ($95 million).

In early April, an English High Court order blocked Dana from making dividend payments unless it also set aside money to redeem the sukuk. The restriction was to apply until the English court held a further hearing on the matter on April 20.

On Wednesday, however, Dana published a decision by the Federal Court of First Instance in the emirate of Sharjah, ordering the company to suspend enforcement of the English court's ban on paying dividends.

Dana, which was holding a general shareholders' assembly on Wednesday to seek approval for measures including the dividend payment, did not comment further on the Sharjah court's ruling, and a company spokesman was not immediately available to comment on how the conflict between the two courts could be resolved.

The company also published a letter addressed to it by the UAE securities regulator, the Securities and Commodities Authority, which advised Dana to seek a ruling from the UAE courts on whether the English court's dividend ban was enforceable in the UAE.

(Reporting by Andrew Torchia, editing by Louise Heavens) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))