Jackson is seeking to give his testimony by video link from the United States.
"It would be unwise for him to travel, given what's he's got now," lawyer Robert Englehart said, declining to elaborate "for the obvious reasons."
A lawyer for Sheik Abdulla bin Hamad Al Khalifa said the medical evidence presented by Jackson's legal team was unsatisfactory.
"It's not the first time a sick note has been presented by Mr. Jackson," the lawyer, Bankim Thanki said. He gave no precise indication of what the illness might be, but told the court that Jackson's condition could be treated with a bandage "if the diagnosis is positive."
Jackson has often been seen wearing a surgical mask in public. In one infamous court appearance in California, he appeared to have a bandage hanging from his hollowed-out nose.
Despite much speculation about his radically changed appearance over the years, he has denied having had any alterations to his face other than two operations on his nose to help him breathe better to hit higher notes.
The judge in the current case, Nigel Sweeney, said he would decide the question of Jackson's travel on Thursday to allow time for medical experts on both legal teams to talk.
Al Khalifa, the second son of the king of Bahrain, claims that Jackson reneged on a contract for an album, a candid autobiography and a stage play, after accepting millions from the sheik.
Al Khalifa was in court Tuesday for the second day of arguments and testimony.
The case is being tried in London by mutual agreement, Al Khalifa's representatives have said, and it is expected to close by the end of the month.
Jackson, 50, and the Bahraini royal first made contact when Jackson was fending off accusations of child molestation in California. Once Jackson was cleared of the charges, Al Khalifa, an amateur songwriter, invited him to the small, oil-rich Gulf state to escape the media spotlight.
Thanki said that the pair even moved in to the same palace to work on music together.
However, Jackson dropped the project in 2006, leaving Bahrain and pulling out of the contract, a move Al Khalifa considered a slap in the face, Thanki said.
"It's fair to say my client felt a considerable sense of betrayal by someone he thought was a close friend," he said. Thanki said Al Khalifa suffered financially too: Jackson's autobiography, intended to be "a frank and personal account" of the singer's life, was alone expected to rack up $24 million.
In the meanwhile, Al Khalifa had given Jackson millions of dollars to help shore up his finances and subsidize Jackson's lifestyle in the small Gulf state — including more than $300,000 for a "motivational guru."
Thanki said Al Khalifa considered the money an advance on the profits Jackson would reap from their pop music project, but Englehart said the money was a gift.
"Sheik Abdulla, fortunately for himself, had the resources to be so generous," Englehart said.
Englehart argued that Jackson wasn't bound by the deal he struck because the contract was technically signed on behalf of 2 Seas Records, a venture which never got off the ground.
"This (contract) was one brick in a building that was never built," Englehart said.