West Ham United's bid to take over the Olympic Stadium after the 2012 Games looks set to become mired in a flurry of legal challenges after Leyton Orient's chairman, Barry Hearn, lodged an application for a judicial review against the government, the mayor of London and Newham council.

Hearn, who claimed that if West Ham move into the Olympic Stadium it could put Orient out of business within three years, made his aggressive move a day after Tottenham Hotspur also launched an application for a judicial review of Newham's processes. Orient have accused the council, which made a joint bid for the venue with West Ham, of granting "unlawful state aid" to the club in lending them £40m.

"We are saying quite specifically that the £40m loan is unlawful and illegal," Hearn said. "We are asking them to withdraw it. It is state aid and they don't have the authority to make this kind of commercial investment under their charter.

"In a letteraddressed to Sir Robin Wales, the Newham mayor, Orient's lawyers accuse the council of being exposed should West Ham default on the loan, of conferring an advantage on the club by giving them a loan at preferential rates and of not offering the loan to any other bidder. That the loan was offered to West Ham alone is believed to form a key plank of Spurs' claim, too.

Newham, which has 21 days to respond, refused to comment. The council and West Ham are negotiating with the Olympic Park Legacy Company (OPLC) over the detail of their final agreement on the £486m stadium. But they have previously argued that the loan does not expose council tax payers, could not have been spent on anything else, and is underwritten by West Ham's owners, David Gold and David Sullivan. They are expected to argue the £40m will be put towards community facilities that will benefit local residents.

"The biggest case that has gone in today is the Newham one," Hearn said. "What are they doing lending £40m to a football club? They are not allowed to be involved in commercial deals. This is state subsidy of a commercial operation, which falls foul of European competition laws."

Hearn also said he is no longer concerned with finding a new home for Orient or seeking compensation: "My efforts are not focused on anything other than stopping West Ham."

He believes West Ham's plan to subsidise tickets, including giving away 6,000 per match to local schoolchildren, will fatally undermine Orient. He has also taken his case against the Premier League for "ignoring their own rules" to a Football Association tribunal, which is expected to meet within a fortnight. The Premier League is confident that it considered the case fully and fairly.

Following a bitter battle the OPLC awarded the stadium to West Ham and Newham, who pledged to keep the athletics track, over a bid from Spurs and AEG that argued the only viable option was to rebuild it as a dedicated football ground.

OPLC's chair, Baroness Ford, who has long‑standing experience of public tenders, said last week she was confident it had followed due process throughout. However, she conceded no final contracts could be signed while the legal process continues.