WASHINGTON — The Supreme Court on Thursday dealt a setback to victims of the Ferdinand Marcos regime who are fighting the Philippine government for ownership of $35 million Marcos funneled out of his country in 1972.

In a 7-2 decision, the justices said U.S. courts were wrong to proceed with a lawsuit that a federal judge in Hawai'i decided in the victims' favor.

The Philippine government wants a Philippine court to rule on the matter before U.S. courts decide the issue. Justice Anthony Kennedy's majority opinion agreed to that approach, ordering dismissal of the U.S. case.

The fight stems from Marcos' transfer of $2 million in 1972 to Arelma S.A., a Panamanian shell corporation that invested the money with Merrill Lynch, Pierce, Fenner & Smith Inc., in New York. By 2000, it had grown to $35 million.

The group of more than 9,500 human rights victims and their heirs argued they should get the money as part of a $2 billion judgment in U.S. courts against the Marcos estate.

The victims, all opponents of Marcos' rule, were tortured or executed during the imposition of martial law in the Philippines from 1972 to 1986.

The case is Philippines v. Pimentel, 06-1204.