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The West Indies Cricket Board (WICB) has lost its case with sponsor Digicel and been told it cannot sanction the match, set for 1 November in Antigua.
Digicel, which was overlooked as a sponsor, took action as it felt it had branding rights on the match, claiming it was effectively a West Indies match.
The ruling added that no West Indians on central contracts could play.
That would mean star players like captain Chris Gayle and batsmen Shiv Chanderpaul and Ramnaresh Sarwan would be barred from playing.
Digicel, as official sponsors of the West Indies team, wanted a larger slice of the publicity and marketing surrounding the match which is being organised by Texan billionaire Stanford.
BBC Sport now understands he and Digicel will be locked in negotiations over the next few days in a bid to save the match.
The news is a blow to Kevin Pietersen's England squad, each of whom is set to become overnight dollar millionaires should the match go ahead - and they win it.
(BBC)
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