Mr Hands claims that he was tricked into buying the firm at an inflated price by Citigroup investment banker David Wormsley, one of his former friends.
Talks between the two parties about a potential settlement deal broke down over the weekend, meaning a courtroom trial in New York is set to go ahead today (October 18th 2010), reports the Guardian.
Mr Hands and his company Terra Firma paid Â£4.2 billion ($6.67 billion) for EMI back in 2007, with EMI struggling badly since that date.
High-profile artists such as Radiohead and Paul McCartney have left the company since the takeover, while Terra Firma has had to seek emergency funds from investors to keep it afloat.
EMI has also been loaded with almost Â£3 billion of debt by Terra Firma.
While Mr Hands has acknowledged that he overpaid for the company, he claims that Mr Wormsley told him another buyer, Cerberus Capital, was interested in EMI, which helped drive up the eventual purchase price.
Problems with the takeover have included the inability of Citigroup to securitize the Â£2.6 billion loan Terra Firma used to buy EMI, an issue attributed by the bank to debt markets seizing up in the wake of the financial crisis and making it impossible to get the loans off its balance sheet.
Mr Hands hopes the court case will result in EMI's debts being restructured, with the investor wanting to see Â£1 billion worth of borrowing forgiven if he matches the figure with an equity investment â a plan that has been previously refused by Citigroup.
The bank would prefer a debt-for-equity swap which would give it a stake in EMI.
Citigroup is currently in the process of returning to independence itself after benefiting from a $45 billion bailout from the US government in 2008.
It has repaid $20 billion and the Treasury is gradually selling off its 27 per cent in the firm.
By Asim Shah