At the centre of the dispute are hundreds of tanks paid for by Tehran but never delivered as a result of the 1979 Iranian revolution, Independent reported.
The Shah of Iran had ordered 1,750 tanks and support vehicles for £650m from International Military Services (IMS) before he was toppled, whereupon the deal was cancelled. Only 185 were delivered and Iran has wanted its money back ever since.
The International Chamber of Commerce sided with Tehran in an arbitration concluded in 2009.
IMS set aside hundreds of millions of pounds more than a decade ago in case international courts later ruled against the firm. In 2010, it was expected that IMS would transfer to an account holding Iranian assets more than £390m, which Tehran could not touch because of EU sanctions.
However, The Independent on Sunday revealed that Iran will again chase IMS for nearly £400m in the High Court this summer.
MoD officials are still hopeful that a negotiated settlement could be completed before the latest legal action starts, but there is some speculation that Tehran's brokers would rather resolve the issue through a court ruling
