The retrial of a Canadian-German arms dealer who played a role in a scandal that shot Chancellor Angela Merkel to power was delayed Monday after the defence accused the German court of bias.

The case against Karlheinz Schreiber, 78, who was sentenced to eight years in 2010 for tax evasion, will resume on Friday, the court in the southern city of Augsburg said.

Schreiber was found guilty of withholding some 7.5 million euros ($9.8 million) in taxes between 1988 and 1993 but the case is being retried after doubts over whether he was liable to pay taxes in Germany during the period.

The defence says he was resident in Canada at the time and liable for tax in that country. The court will also consider whether bribery charges against him had passed the statute of limitations.

In May, Augsburg's higher regional court ordered Schreiber's release after he suffered a heart attack, saying there were "significant doubts about his capacity to stay in prison."

He has since been under a form of house arrest.

Schreiber played a key role in a slush-fund affair that rocked Merkel's centre-right Christian Democratic Union (CDU) in the 1990s and tarnished the image of former chancellor Helmut Kohl.

With the scandal at its height, Merkel wrote a now-famous editorial in the Frankfurter Allgemeine Zeitung daily calling for Kohl to come clean and demanding the party break with its murky past.

Her willingness to put her head above the parapet and challenge her former mentor marked Merkel out as a high-flyer and she was elected head of the CDU the following year.