Hipgnosis Songs Fund, the music investment company backed by Blackstone, has encountered a legal setback in its dispute with Barry Manilow over a $1.5m bonus payment.

A London High Court ruling determined that the case cannot proceed in the UK, allowing Manilow to continue litigation in California. However, Hipgnosis can still pursue claims regarding allegedly unpaid royalties.

The dispute originates from a $7.5m agreement signed in 2020, under which Hipgnosis acquired the rights to Manilow’s music catalogue, including iconic hits like Mandy and Copacabana. The deal included performance-based bonus payments of $750,000 each if the catalogue’s revenue increased by 10% annually over four years.

Hipgnosis sought a UK ruling to clarify that Manilow was not entitled to the $1.5m and requested payments for royalties allegedly paid directly to Manilow or his companies by Sony Records. However, Manilow argued that the matter should be handled in California, where he had already initiated legal proceedings. The UK court sided with Manilow, granting him the choice of jurisdiction and effectively pausing Hipgnosis’ case in the UK concerning the bonus payment.

Despite this, Hipgnosis can continue its pursuit of unpaid royalties through London courts. This ruling marks an unusual legal challenge for Hipgnosis under Blackstone’s ownership, as the firm has aggressively expanded its music rights portfolio. Blackstone acquired Hipgnosis in 2023 for $1.6bn, seeing strong potential in the value of music assets in the streaming era.

A Hipgnosis spokesperson described the dispute as a “routine commercial matter” involving contract interpretation. “While we regret that this couldn’t be resolved directly, we continue to hold Barry and his music in the highest possible regard and are confident this can be settled in a fair and reasonable way,” the company stated.