Russian shareholders of TNK-BP have blocked BP's Arctic exploration deal with state-owned Rosneft.
"We won," said a spokesman for the oil joint venture's Russian shareholders.
A Swedish arbitration panel in London agreed that the Arctic deal violated a previous agreement between them and BP made when they set up TNK-BP.
BP said it was disappointed at the decision, and hoped it could still go ahead with a share swap agreed with Rosneft as part of the deal.
"BP looks forward to finding a way to resolve its differences with its Russian partners to allow these important Arctic developments to proceed in future," said the UK oil firm in a statement on the arbitration panel's decision.
However, the UK firm faces an effective deadline for breaking the deadlock of 14 April, according to the BBC's business editor, Robert Peston.
That is the date on which BP's agreement with Rosneft must be consummated by, or else it will expire.