An international America's Cup jury on Thursday ruled that the regatta director had no authority to impose changes to class design rules, which may enable normal regatta racing to begin after three embarrassing days with just one boat sailing the course.
Luna Rossa Challenge, from Italy, and Emirates Team New Zealand objected to the requirements put in place after a May accident that killed Sweden's Artemis Racing crew member Andrew Simpson, an Olympic sailing champion from Britain, and wrecked the team's AC72 boat during a practice sail on San Francisco Bay.
"Emirates Team New Zealand is pleased the jury has maintained the sanctity of the AC72 Class Rule in ruling that it can be changed only by unanimous consent of the competitors and the Regatta Director," Team New Zealand said in a statement after the ruling.
Luna Rossa declined to comment on the ruling.
Last week, Regatta Director Murray warned that if the jury ruled against his measures, meant to make the AC72s more manageable, he would have to tell the Coast Guard that the races are no longer safe - an action that could scuttle the event altogether.
Team New Zealand said in its statement that it proposed a special dispensation to allow Artemis to compete in the Cup.
Artemis, which is still working to get its second boat ready and hopes join the competition later in the summer, has said that it would be forced out of the competition if the rule changes were rolled back.
Bickering over the rules is an America's Cup tradition but this year's feud has been a serious blow to a regatta that is just getting started and has already fallen far short of expectations.
Luna Rossa, backed by Prada fashion mogul Patrizio Bertelli, boycotted the first race on Sunday, leaving New Zealand's crew to speed its AC72 catamaran around the course alone as hundreds of VIP guests invited by its corporate sponsors watched from chase boats.
"There's always been some kind of brouhaha but I've never seen one quite this deep," said Kimball Livingston, a competitive sailor and writer at blueplanettimes.com. "Probably there's a certain amount of bluster and people cope and go forward -- but it's very hard to measure."
New Zealand sailed the course by itself again on Tuesday, with its scheduled competitor Artemis still working on its boat.
Luna Rossa said it would complete its first "race" on Thursday, also completing the circuit without Artemis.
New Zealand and Luna Rossa had argued that Murray's rules affecting yacht rudders unfairly benefit Ellison's Oracle Team USA, which won't race until the finals in September.
French fashion house Louis Vuitton is cutting back its sponsorship funding for the challenger Cup due to the lower-than-expected turnout of teams, the New Zealand Herald reported earlier this week.
Ellison, who won the America's Cup in 2010 and with it the right to set the rules for this year's race, hoped to make the 162-year-old competition more accessible to everyday sports fans and push the boundaries of high-tech boat design.
The result was a competition featuring 72-foot lightweight twin-hulled boats made of carbon fiber, with hard "wing" mainsails. Called AC72s, the huge catamarans can lift up out of the water on hydrofoils. Since the Artemis accident followed an earlier non-deadly capsize by Oracle, criticism has grown that AC72s are dangerous and hard to maneuver in San Francisco Bay's heavy winds and rip currents.
The rules in question would have allowed teams to alter a wing-like devices known as a rudder elevator attached to the bottom of the blade-like rudders protruding down from the back of each hull.
Increasing the area and altering the shape of the rudder elevators can provide more stability while the catamarans are hydrofoiling, making the boats safer.
New Zealand says it long-ago made other sacrifices in its boat design to make its catamarans stable. It and Luna Rossa said the rules amounted to a last-minute opportunity for Oracle and Artemis to implement improvements to their yachts that they should have made earlier.