(Recasts lead, adds details from ruling and background)
By Tom Hals
Sept 15 (Reuters) - The Chinese contractor behind the nearly complete Baha Mar mega-resort in the Bahamas scored a victory over the project's developer on Tuesday with the dismissal of the resort's U.S. Bankruptcy in favor of proceedings in the Bahamas.
The ruling, by a U.S. Bankruptcy Court judge in Delaware, helps simplify the complex dispute that erupted when the $3.5 billion project missed its scheduled opening in March and construction ground to a halt.
Baha Mar will be one of the biggest resorts in the Caribbean when it opens, and is considered vital to reviving the Bahamian economy.
"Many stakeholders in the project would expect that any insolvency proceedings would likely take place in the Bahamas," U.S. Bankruptcy Judge Kevin Carey wrote in his 24-page opinion. "I can perceive no greater good to be accomplished by exercising jurisdiction over these Chapter 11 cases."
Baha Mar said in a statement it was disappointed with the ruling and will explore its alternatives.
The unusual fight began when Baha Mar put a small American subsidiary into U.S. Bankruptcy in June, which allowed the rest of the corporate family to seek U.S. Bankruptcy despite having no U.S. operations.
The Chinese contractor and the government of the Bahamas prefer a liquidation proceeding in Bahamian courts. Earlier this month the Bahamas' Supreme Court appointed provisional liquidators who are changed with taking possession of Baha Mar's assets.
Baha Mar had argued the U.S. Bankruptcy code offered a better chance for a deal to jumpstart construction. Carey called the U.S. code "an ideal vehicle" for resolving the case, but said he was disappointed the company had not reached any agreements to end the bankruptcy.
A completed resort would employ more than 5,000 people in the Bahamas, where unemployment is 16 percent, and boost its gross domestic product by about 12 percent, according to estimates from the government and Baha Mar.
The resort took on thousands of staff this year, but when it failed to open as scheduled it soon ran short of money. It filed for U.S. Bankruptcy on June 29.
The Chinese contractor, a unit of China State Construction Engineering Corp, and the resort's Bahamian developer, Sarkis Izmirlian, have traded blame for the delays.
The project was funded by a $2.45 billion loan by China's export import bank and $900 million from the Izmirlian family.
Carey did not dismiss the bankruptcy of Northshore Mainland Services Inc, a small Florida-based travel services subsidiary of Baha Mar. (Reporting by Tom Hals in Wilmington, Delaware; Editing by Chris Reese and Leslie Adler)