Beijing's Chaoyang District Court agreed last month to hear the case brought by the company that markets Ai's work, a departure from consistent refusal by the courts, strictly controlled by the ruling Communist Party, to give dissidents any hearing.

His supporters say the case has been trumped up, part of a drive to muzzle the outspoken social critic. The hearing was still in progress late in the evening.

Ai said that despite the courts' acceptance of his lawsuit, police warned him not to attend the hearing, and sent several patrol cars to park outside the studio where he lives.

"'You can never make it. Don't even try,'" Ai, 55, said police told him. They gave no reason.

"This nation can have anything, they can have a satellite that goes to the sky and the moon, but they can never give you a clear reason why," he said. "This is ridiculous, right? There's no conversation, no discussion. Maybe they don't even know the reason. It's a really mysterious nation."

The bearded artist has been a persistent irritant to authorities and has parried efforts to silence him, communicating with his supporters on Twitter and calling for a public forum to discuss his tax case.

"From a certain perspective we already won the lawsuit early on as we have won over public opinion," Ai said.

"But within this system, we can never win. Because when a system rejects interaction, rejects adjustment and refuses to own up to its own mistakes, you can never prevail over it."

Ai was detained without charge in April 2011 and held mainly in solitary confinement until his conditional release last year.

Ai stayed away from the hearing, but he said his wife Lu Qing, who is also the firm's legal representative, had attended.

Ai's legal consultant, Liu Xiaoyuan, was also unreachable after he was told to meet state security officers on Tuesday, according to Ai and Liu Yanping, a worker in Ai's studio.

Liu Xiaoyuan did not answer calls to his mobile phone.

Security officers have instructed prominent dissidents to remain in their homes and stay away from the hearing.

Dozens of police and cars blocked journalists from approaching the court, saying they did not have permission to be there.

Ai is urging the court to overturn the city tax office's rejection of his appeal against the tax evasion penalty imposed on Beijing Fake Cultural Development Ltd, the company that has helped produce his art and designs.

The company's lawyer, Pu Zhiqiang, told Reuters on Tuesday that he hoped for a fair trial. "This case has always been a fabricated case," he said.

Pu said previously that officials had not shown him any original documents with evidence of tax evasion and had held a closed hearing last July, which he said was against the law.

Government efforts to muzzle Ai have frequently backfired, as demonstrated by an outpouring of public sympathy - and cash - in response to the tax penalty. About 30,000 people donated money to help Ai cover an 8.45 million yuan ($1.3 million) bond required to contest the tax charges.

"We simply have to ask (the authorities): what can they achieve by this?" Ai said. "Don't you think this nation should be ruled by law?"

China's official media has not reported the lawsuit. But the Global Times, a popular tabloid owned by the People's Daily, said in a commentary on Monday that the recognition given to Ai by the West "is not acknowledged among the majority of Chinese".