The future of one of Britain’s leading nanotechnology companies is in doubt amid a legal battle over one of its key products and the near-collapse of its biggest contract with a national oil and gas company.

Oxonica, a technology company listed on the Alternative Investment Market (AIM), makes Envirox — a product designed to boost the efficiency of diesel fuel. Envirox is used in the fleet of buses operated by Stagecoach, the British national bus company, which also owns two million shares in Oxonica. The nanotechnology company is also one of the stable backed by Richard Farleigh, the Australian businessman and star of BBC2’s Dragon’s Den.

It has emerged that Envirox is at the centre of a legal dispute between Oxonica and Neuftec, a company based in the Dominican Republic that claims to have invented the fuel additive. Oxonica has filed a patents suit in London’s High Court to protect itself against the claims. Neuftec has said that it will fight the suit and believes that the British firm is using its technology unlawfully.

Envirox, while just one of Oxonica’s growing stable of nanotechnology products, is its most significant revenue driver.

Kevin Matthews, the chief executive of Oxonica, told The Times that the dispute with Neuftec was minor. “Intellectual property disputes like this are commonplace in nanotechnology,” he said. But he urged Neuftec to come to the negotiating table.

Ronen Hazarika, the founder of Neuftec, said that any settlement would have to be substantial.

To compound the problems with Neuftec, Oxonica also faces losing its biggest Envirox contract — a deal worth more than $12 million (£6.1 million) from Petrol Ofisi, the Turkish national oil and gas company. Oxonica signed the Ofisi deal last year, which sent annual revenues soaring from £1.2 million to more than £10 million.

Last week Oxonica’s shares fell more than 12 per cent on the AIM as it revealed that tests using Envirox in diesel engines in Turkey were disappointing. Oxonica claimed at the time that further tests had to be run, but Mr Matthews told The Times that the future of the Turkish deal looked bleak.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive