Israel is set to become the new battleground in a lawsuit targeting ImageSat, a company that has refused to rent its private spy satellites to Venezuela despite what shareholders say was an obligation to do so.

A federal judge ruled this week that New York is the wrong venue for the suit, in which investors allege company executives scuttled a deal with Venezuela — an ally of Iran — at the behest of the Israeli government. It now appears likely that the plaintiffs will instead have to file suit in Israel, where they may have a more difficult time bringing their case.

ImageSat, a partnership between private businessmen and two Israeli aerospace companies, owns several spy satellites that it rents out to nations around the world. Its executives are supposed to avoid political allegiances when making business decisions, but the plaintiffs claim they aborted a lucrative deal with Venezuela out of loyalty to the Israeli government. Israel was looking to curry favor with America, which has a hostile relationship with President Chavez of Venezuela, according to the complaint.

A Southern District judge, Denise Cote, dismissed the case in New York on Tuesday, citing in part that “Israel has a strong interest in the affairs of ImageSat and its corporate governance.”

Her decision is a boon for the defense, which may benefit from more favorable rules governing lawsuits if the case is refiled in Israel.

“It’s a commonly held view by multinational corporations that avoiding litigation in U.S. court is a worthy goal,” an attorney familiar with the case said.

The ruling is also good news for the Israeli government, which took the unusual step of officially requesting that the lawsuit be brought under Israel’s jurisdiction. It had expressed concern that American procedures do not provide enough secrecy for information that might be related to national security.

The Venezuela deal at issue in the ImageSat suit may be at least tangentially related to a corruption investigation that is threatening to topple Prime Minister Olmert of Israel. One of the American plaintiffs in the case, Morris Talansky, was questioned this week over whether he received any favors from Mr. Olmert in return for giving him about $150,000 in cash over a 15-year period.

Mr. Talansky’s connection to Mr. Olmert has not been an issue in the ImageSat lawsuit so far. But Israeli newspapers have suggested that Mr. Olmert made a phone call to an Israeli diplomat in Venezuela asking him to facilitate the deal between Venezuela and ImageSat — despite the alleged opposition of the Israeli defense ministry.

A lawyer for the plaintiffs, Ira Matetsky, said he will appeal the decision in New York and will refile the suit in Israel if the move is unsuccessful.