LUXEMBOURG/ZURICH (Reuters) -Investors who lost money to US swindler Bernard Madoff through a fund set up by UBS cannot seek compensation directly from the Swiss bank, a Luxembourg court ruled yesterday, relieving pressure on UBS.

The court rejected the demands of a small group of investors in the LuxAlpha fund looking to file individual claims against UBS rather than going through the fund's liquidators.

The ruling was good news for UBS, lawyers said, because it could cut compensation costs and the public relations fall-out for the bank would be limited to a single case for each fund.

"UBS welcomes the clarification of Luxembourg law as expressed by today's decisions of the Luxembourg Commercial Court," the bank said in a statement.

Franc Greff, who represents clients in four of the 10 cases being reviewed, told Reuters he would appeal against the decision.

The LuxAlpha liquidators, appointed by a judge in April 2009 to recoup investor losses, filed a lawsuit in December, suing UBS, the fund's manager and Luxembourg's financial regulator among others.

The verdict could affect many pending cases against UBS, which acted as a custodian for, but did not run, the LuxAlpha and LuxInvest funds, which lost a total of about $1.7 billion to Madoff.

It could also signal that investors who lost nearly $1 billion to Madoff from investments in Herald, a fund of HSBC's Luxembourg arm HSSL, will have to follow the same path.