"I hope FEER will seriously fight this matter and not bow to the Lees," said Chee Soon Juan, whose recent interview in the publication led to the suit by Lee Hsien Loong, Singapore's prime minister, and Lee Kuan Yew, his father and independent Singapore's first leader.

The suit is seen as a test of new conditions placed on leading international media that circulate in Singapore.

FEER was one of five publications, along with the Financial Times, the International Herald Tribune, Time and Newsweek, that were recently told they must submit a security deposit of S$200,000 (US$127,000) and appoint a local representative who could be sued.

The disputed article, "Singapore's 'Martyr' ", written by Hugo Restall, the FEER editor, quoted Mr Chee criticising the Lees and the alleged secrecy of the Government of Singapore Investment Corp, which is headed by them as chairman and vice-chairman.

The Lees earlier sued Mr Chee for similar comments, saying he had accused them of mismanaging GIC funds. Mr Chee was convicted of defamation in Singapore as a result of the suit.

Mr Restall and Hong Kong-based Review Publishing, FEER's publisher, would not comment on the suit. But Dow Jones, which owns Review Publishing, has had a history of contesting libel suits filed against it by Singapore authorities in the local courts.

The case could present several challenges in the enforcement of Singapore's libel laws. FEER does not have a representative or assets in Singapore as required under the new regulations.

A judgment against FEER would have to be enforced by Singapore authorities requesting the Hong Kong courts to impose any penalties, believed to be unprecedented in a libel suit filed by Singapore officials.

But a request by Singapore for the Hong Kong courts to enforce any judgment could lead to new hearings in Hong Kong that might consider evidence about the judicial impartiality of the Singapore courts.

No foreign publication has ever won a libel suit filed by Singapore authorities in a Singapore court.

Authorities could possibly try to curb the distribution of FEER in Singapore, which has a circulation of about 3000 copies in the city-state. But this could prove difficult because FEER is not sold on newsstands but mailed to subscribers.

Some aspects of the suit also puzzled media observers. FEER had offered to publish a interview with Lee Kuan Yew in response to Mr Chee's criticism, but the offer was described by Drew & Napier, the lawyers acting for the Lees, as an attempt to profit from FEER's alleged defamation.

Additional reporting by Justine Lau in Hong Kong

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