Reuters
Labour leader Jeremy Corbyn.
Due to Corbyn's unpopularity among Labour MPs, if the court rules against Corbyn, he could be taken out of the leadership race.
This could result in a coronation of leadership rival Owen Smith, a suspension of the leadership election, or a reopening of nominations.
The legal challenge has been launched by Labour donor Michael Foster, whose lawyers will argue that the National Executive Committee (NEC) made the wrong decision in giving Corbyn an automatic spot on the ballot paper.
However, it is unclear exactly what would happen if Foster wins the case.
Dr. Peter Catterall, a specialist in opposition studies at the University of Westminster, previously told Business Insider that he did not expect the outcome to have the power to rule out Corbyn from the race:
"Even if Foster wins the court case, the party could just ignore him, because what standing would it have? The Labour Party has not broken company law. All you can say is the party may have broken its own very opaque rules. I really don't think the court could force the NEC to rescind the decision it has already made."
BBC
Labour leadership candidate Owen Smith.
"The nominations have closed, so if Michael Foster were to win the legal case, then we would have a coronation for Owen Smith. It would make the whole thing a farce," a source close to Corbyn told PoliticsHome.
"It would be legally questionable if the NEC, having said that Jeremy should be on the ballot paper, if he is then not on it. It would be in the NEC's interests to re-open nominations at the very least."
Corbyn faces Owen Smith, the former Shadow Work and Pensions Secretary, in the party's leadership election.
Corbyn is strong favourite to win the vote among Labour members. The winner is due to be announced on the 24th September.
Stay tuned to Business Insider for updates.