The King of Bahrain's son planned to revive Michael Jackson's career with songs he had written himself, London's High Court has heard.
Sheikh Abdulla Bin Hamad Bin Isa Al-Khalifa also gave the pop star financial support, his lawyer said.
The royal is suing Mr Jackson for £4.7m for reneging on a music contract which would have paid back the loans.
Mr Jackson contests the claim, saying there was no valid agreement and that the payments were "gifts".
An application has been made for the star to give evidence from the US via a video link during the 12-day hearing.
Sheikh's invitation
The sheikh and Mr Jackson had a "close personal relationship" during his six-month stay in Bahrain three years ago, the royal's lawyer Bankim Thanki told the court.
The singer travelled to the country, with his children and personal staff, at the sheikh's invitation "to relax" shortly after being cleared of child abuse charges in the US.
Prior to his stay, Sheikh Abdulla set up Mr Jackson with a recording studio on his Neverland ranch and sent him his own musical compositions.
A recording of a finished song will be played in court, Mr Thanki said.
The court heard that under the agreement, an album, autobiography and stage play were to be produced.
In 2006, plans were announced for the star to release a new album on a label based in the Gulf state and owned by Sheikh Abdulla.
The sheikh claims that despite having paid the $2.2m (£1.5m) cost for Mr Jackson to record a song intended to benefit the victims of Hurricane Katrina, the singer failed to attend the studio for the final recording and the song was never released.
He also says he paid for and built a recording studio in Bahrain for Mr Jackson and himself to make recordings together.
'Gifts'
In addition, he paid all the singer's living, travel and other expenses until his departure from Bahrain in May 2006, and advanced funds to retain legal and financial advisers.
Mr Jackson has contested the claim, saying there was no valid agreement, adding the sheikh's case is based on "mistake, misrepresentation and undue influence".
He has also said no project was ever finalised and payments were "gifts".
The singer has admitted that he signed a document which he understood gave him a substantial shareholding in the 2 Seas recording company.
But he challenges the sheikh's description of him as "an experienced businessman" and says he never read the terms of the document and was never advised to take independent legal advice.
He also claims that the sheikh, a powerful and influential public figure, exercised "undue influence" over him when he was emotionally exhausted after his highly-publicised criminal trial.
The dispute comes just days after the singer had to give up his Neverland ranch due to financial problems.
The hearing will continue on Tuesday.
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