Spyware maker NSO Group cannot use its government clients to shield itself from litigation, a US appeals court ruled on Monday, a decision that allows WhatsApp's lawsuit against the Israel-based firm to resume.

In 2019, Facebook and its WhatsApp subsidiary sued NSO claiming the firm's intrusion software, known as Pegasus, was used to unlawfully compromise the accounts of WhatsApp customers.

NSO denies any wrongdoing. While WhatsApp claimed members of civil society had their phones infiltrated by Pegasus, NSO insisted it only sold its software to "licensed government intelligence and law enforcement agencies to help them fight terrorism and serious crime," and that using its software to surveil political opponents, advocacy groups, and journalists is contractually prohibited.

"Whatever NSO’s government customers do with its technology and services does not render NSO an 'agency or instrumentality of a foreign state,' as Congress has defined that term," the appeals panel said. "Thus, NSO is not entitled to the protection of foreign sovereign immunity."