Jailed ex-deputy prime minister Anwar Ibrahim is prepared for a legal battle with Prime Minister Mahathir Mohamad after refusing to pay the costs of a failed defamation suit against the premier, lawyers said today.

"Anwar is willing to fight it in court. He is not going to pay Mahathir," Anwar's counsel Sankara Nair told AFP .

Nair said Mahathir's lawyers had sent three consecutive letters demanding payment after the Court of Appeal in April ordered Anwar to pay the prime minister's legal costs of RM35,381.

The latest letter, dated Sept 5 warned that if the payment was not made, Mahathir would start bankruptcy proceedings against Anwar, he said.