By Joseph Ax

NEW YORK (Reuters) - A divided New York state appeals court on Tuesday reinstated two lawsuits involving the Algosaibi family conglomerate, Dubai-based Mashreqbank PSC and Maan al-Sanea, the Saudi billionaire head of the Saad Group, in connection with a longstanding fight over an alleged multibillion-dollar fraud.

The ruling, which found that New York was the appropriate forum to hear the lawsuits, is the latest development in the global legal battle between al-Sanea and his in-laws, the Algosaibis. A spokesman for al-Sanea declined to comment on Tuesday's decision.

The Algosaibi family claims al-Sanea, who married into the family 30 years ago, defrauded it of billions of dollars after he was put in charge of its financial businesses. Al-Sanea and the Saad Group have denied the allegations.

The 2009 collapse of al-Sanea's Awal Bank and Algosaibis' The International Banking Corporation, both based in Bahrain, left more than 100 banks, including Deutsche Bank, HSBC and Societe Generale, owed an estimated $22 billion.

Since then, the Algosaibi family and al-Sanea have faced off in courts in New York, Saudi Arabia, Bahrain, London, the Cayman Islands and Geneva.

In 2009, Mashreqbank sued the Algosaibis in New York court, seeking to recover $150 million in foreign exchange trades executed in New York. Those funds eventually were transferred into an account controlled by al-Sanea, according to the bank's lawsuit.

The Algosaibis then filed a lawsuit in New York against al-Sanea, claiming he and his Awal Bank had used Algosaibi accounts as part of a massive fraud. The Algosaibis also asserted in court filings that Mashreqbank aided al-Sanea in the alleged scheme, according to the decision.

The two lawsuits were dismissed in 2010 by state Supreme Court Justice Richard Lowe, who granted al-Sanea's request to toss out the case against him, saying it did not properly belong in New York state court. As a result, he also dismissed the lawsuit brought by Mashreqbank, since the two cases were closely intertwined.

In a 3-2 ruling, an intermediate state appeals court reversed that decision, ruling that Lowe had overstepped his authority and that New York was an appropriate forum for the complaints.

"New York has a compelling interest in adjudicating controversies that implicate its preeminent position in the international banking system," the majority wrote in the ruling from the Appellate Division, First Department.

In a dissent, however, two justices said Lowe had correctly found that the case should be tried elsewhere, since the dispute involves foreign entities, evidence and witnesses are located outside of New York and the "resolution likely requires the application of foreign law."

Eric Lewis, a lawyer for the Algosaibi company, said in a statement the ruling recognized the "critical role of New York courts" in combating international fraud.

"In today's world, frauds can involve numerous countries, none of which may have the resources or critical involvement to investigate," he said.

A lawyer for Mashreqbank, Carmine Boccuzzi, said the bank was "confident it will prevail" in its claim against the Algosaibis.

A 3-2 ruling typically means the state's highest court, the Court of Appeals, will hear an appeal if al-Sanea decides to file one.

The cases are Mashreqbank PSC v. Ahmed Hamad Al Gosaibi and Brothers Co, and Ahmed Hamad Al Gosaibi and Brothers Co v. Maan Abdul Waheed Al Sanea et al., New York State Supreme Court, Appellate Division, First Department, Nos. 6917 and 6918. (Reporting by Joseph Ax; Additional reporting by Douwe Miedema; Editing by Noeleen Walder)