The bitter dispute spans the globe as Giersch, who lives in Monaco, is barred from returning to the U.S. because of a revoked visa. The Gossip Girl actress, 43, has been fighting for sole custody of Hermes, 5, and Helena, 3, so she may keep them in the country.
"Kelly is devastated by the court ruling and will never stop fighting for her children," her spokesperson tells PEOPLE. "An appeal is already in the process."
To protect the children and also Kelly, I have decided to continue not to comment," Giersch tells PEOPLE. His lawyer, Fahi Takesh Hallin, meanwhile says Giersch is "focused on co-parenting the children, and continuing to promote any and all contact of the children with Kelly."
As for Giersch's inability to return to the U.S., a source claims accusations made by Rutherford are responsible for the German businessman's revoked visa.
"Kelly stated on the record that Daniel was dealing drugs and weapons in South America, which under the Victory Act is considered terrorism," a source tells PEOPLE, adding it's all untrue. "Just the accusation is enough to revoke his visa." Papers show Rutherford is now required to make "good faith efforts" to facilitate his attempts to get his residence right reinstated.
Despite their feuding parents, Hermes and Helena, who have lived with Giersch in Monaco since May 20, have spent their summer like any other children and will attend a prestigious international school in the fall.
"They play tennis at the Monte Carlo Country Club, have friends, snorkel and play at the beach," a source tells PEOPLE. "They just enjoy the surroundings with their grandma, grandpa and father's undivided attention."
The court has determined that after two years it will be assessed whether Giersch can successfully re-enter the U.S. and what's in the best interest of the children.
The latest advancements in the custody saga follow a bitter divorce in which Rutherford tried to bar Giersch from leaving the country with Hermes, hired a private eye to videotape him, failed to notify him of Helena's 2009 birth and filed a restraining order against him.
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