By Georgina Prodhan and Kate Holton
LONDON (Reuters) - Rupert Murdoch faces a two-day grilling at Britain's High Court next week by a judge investigating whether the political ties of the world's most powerful media tycoon created a company culture where illegal phone hacking could flourish.
The 81-year-old mogul and his son James are battling to defend their business in Britain after a year-long phone hacking scandal which has convulsed his media empire, embarrassed politicians and provoked a wave of public revulsion.
Murdoch will have to answer detailed questions on Wednesday and Thursday from lawyers led by a senior judge who was ordered by Prime Minister David Cameron to get to the bottom of ethical failures in Britain's often salacious press.
Murdoch was the first newspaper boss to visit Cameron after he took office in 2010 - entering via the back door - and politicians from all parties have lived in fear for decades of his press and what they might reveal about their personal lives.
His influence over prime ministers goes back decades: papers released this year showed that Murdoch held a secret meeting with then-Prime Minister Margaret Thatcher in 1981 to clear his acquisition of the Times of London.
But in the past year Murdoch has turned against English politicians in general and against Cameron in particular after the prime minister failed to wave through his planned multi-billion-dollar acquisition of pay-TV operator BSkyB.
The Leveson Inquiry has gripped audiences around the world as evidence from celebrities, politicians and crime victims whose phones were hacked by Murdoch journalists has been shown live on the Internet.
The investigation is now turning its attention to the relationships between Britain's press and politicians.
In a debate in parliament as long ago as 2010, opposition lawmaker Tom Watson railed against the power of the Murdoch press, in particular Rebekah Brooks, an ex-News of the World editor then running Murdoch's British newspapers.
"The truth is that in this House we are all, in our own way, scared of the Rebekah Brookses of this world," said Watson, a dogged critic of the Murdochs and member of a parliamentary committee investigating the phone-hacking.
"They are untouchable, they laugh at the law, they sneer at parliament. They have the power to hurt us, and they do, with gusto and precision, with joy and criminality. Prime ministers quail before them, and that is how they like it."
Critics argue that staff at the News of the World felt above the law as their boss and owner regularly dined with the prime minister and senior police officers. Brooks, a close friend of both Murdochs, Cameron and previous prime ministers, resigned last July.
The News of the World, on which Murdoch founded his British media empire, was known for its sensational revelations about the private lives of public figures, helping it sell millions of copies every Sunday until Murdoch shut it down last July.
Some were traditional kiss-and-tell stories but the source of many others was mysterious until it emerged that private investigators hired by the tabloid had been hacking the phones of every echelon of British life, including the royal family.
Brooks often used information harvested in this way as "levers" to effectively blackmail the subjects instead of publishing the revelations, ex-News of the World journalists have told Reuters.
Reports that phone-hacking at the paper went beyond the one "rogue" journalist the company had long scapegoated go back as far as 2006, but police failed to pursue their investigations after that journalist was jailed in 2007.
The police probe was only revived a year ago after a relentless campaign by Britain's left-leaning Guardian, a rival of the Murdoch newspapers.
The political mood quickly swung against Murdoch after the Guardian revealed in July that the News of the World had hacked the phone of murdered schoolgirl Milly Dowler, emboldening opposition politicians and forcing Cameron to follow suit.
Cameron ordered the Leveson Inquiry and distanced himself further from his ex-spokesman Andy Coulson, a former News of the World editor whom he had previously defended.
A senior political pollster, who did not want to be identified because of the sensitivity of the subject, said Murdoch had been heavily damaged by the uproar in July.
"I think his influence today is almost nil. I think it has collapsed in the last nine months," he said. "But before July, the influence was immense."
Murdoch's News Corp media empire spans the Twentieth Century Fox movie studios, pay-TV operations around the world and newspapers including the Wall Street Journal.
In Britain, he owns the Times of London and its sister Sunday Times, The Sun tabloid that is now published seven days a week, and 39 percent of BSkyB, which is Britain's dominant pay-TV operator with an influential news channel.
James Murdoch is likely to be questioned about his contact with the government while it decided whether to approve the Sky takeover. The head of Sky News will appear before the inquiry on Monday.
The last time Murdoch was publicly called to account for the behavior of the News of the World was last July, when a parliamentary committee investigating the phone-hacking scandal summoned him and James Murdoch to answer questions.
Rupert Murdoch looked tired, arriving at parliament after meeting the parents of Dowler, the murdered schoolgirl. He quickly blurted out a prepared statement about that day's being the most humble of his life, but answered many questions in monosyllables, leaving James to elaborate.
However, the 81-year-old quickly recovered his fighting spirit and by last month was declaring war on "toffs and right wingers" on Twitter.
The parliamentary committee is due to publish its report next month on the results of its investigations, including whether it was lied to by Murdoch executives.
But its members are not professionals, unlike Judge Brian Leveson and his barristers, who have torn apart the arguments of newspaper men from chatshow host and ex-Daily Mirror editor Piers Morgan to Express Newspapers owner Richard Desmond.
"I hope that there will be detailed questioning of the Murdochs in order to get to the truth of what the relationship was between politicians and the press. This is critical," said Evan Harris, an ex-MP who campaigned for a press inquiry.
(Reporting by Georgina Prodhan and Kate Holton; Editing by Guy Faulconbridge and Giles Elgood)