The latest row follows weeks of publicity over Paul Burrell's book
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The Guardian newspaper's challenge to an injunction banning it from publishing a story about a former royal servant is being heard in private.
The newspaper's lawyers went before a High Court judge on Wednesday over a temporary injunction served against it on Monday night.
It followed a similar injunction issued against the Mail on Sunday, preventing it from naming the same former royal servant.
The royal servant has argued that his name should not be revealed as the publication of the story would seriously libel him.
Lawyers say it is extremely unusual for an injunction to be granted in these circumstances when the newspaper involved aims to establish the truth of what it is saying in any libel action.
The newspapers argue that a special exception is being made for someone with royal connections and say freedom of speech is at stake.
Leading barrister Anthony Scrivener QC told the BBC: "It is rare to get an injunction in a libel case because if the defence say we will justify - it isn't libellous because it is true - then if you impose an injunction upon them it is censorship.
"The court will not do that. It will say OK if you are going to justify you go ahead and try. If you lose you'll be subject to enormous damages."
The injunction against the Mail on Sunday was immediately followed by a written demand from a senior royal that
there should be no publication of the story, the newspaper said.
Desmond Browne QC, for the former servant, told Mr Justice Tugendhat on Wednesday that he was applying to continue the injunction granted over the phone on Monday evening by Mr Justice Henriques.
He then added: "My application is that this hearing is going to have to be in private and in order to make that application I must - regrettably, the press may feel - ask your Lordship to go into private."
The judge asked the media to leave the court and did not say for how long, but he did say that given the level of public interest, he was very reluctant to make the whole of the injunction hearing in private.
The Guardian's legal team said there was no need for the hearing to be in private as reporting restrictions could be put in place pending its conclusion.
The hearing will continue on Thursday.
The Mail on Sunday has also said it would fight the first injunction, imposed by a High Court judge on Saturday night.
'Right to know'
The Mail on Sunday said a letter from a senior Royal had also warned it not to publish the story, written after interviews with a second former royal servant.
The paper said it would appeal at the High Court because the public had an "unquestionable right to know".
It said the interviews with the second former royal servant were supported by a sworn affidavit.
But an injunction was granted by a judge who made an order preventing publication of any details of the
story.
In the last few weeks there has been widespread media coverage of the Royal Family which was prompted by former royal butler Paul Burrell's book A Royal Duty.