Kamilya Mohammedi Tuweni says she was seized by Kenyan special police and accused of being an al-Qaeda agent while on trip to Kenya in 2007.
Ms Tuweni was released without charge after being detained for 72 days, and was given no reason for her detention.
The head of Kenya's Anti-Terrorism Police Unit denies the allegations.
Monday's proceedings have now finished and the presiding Judge Isaac Lenaola has set the next hearing for 29 October.
Ms Tuweni is suing the Kenyan government for financial compensation and is demanding a formal apology for her treatment.
Frequently breaking down in tears as she gave evidence to the court in Nairobi via video-link from London, Ms Tuweni said that she needed money to pay for medical help, according to Kenyan rights group Journalists for Justice, whose representative was present at the hearing.
Documents submitted to the court stated that Ms Tuweni was suffering from Post Traumatic Stress Disorder (PTSD) after she was "mentally and physically tortured" during her detention.
Her ability to make a livelihood for her and her children had been dealt "a fatal blow" by her ordeal, and she had forever lost the trust of her business contacts as a result, the documents added.
The Kenyan police deny all the allegations, and "have no records" of Ms Tuweni or her colleagues being taken into custody, according to the replying affidavit from Anthony Sanguti, of Kenya's Anti-Terrorism Police Unit (ATPU).
According to UK-based campaign group Redress, she was beaten throughout her time in captivity, threatened with rape and narrowly escaped being sold for drugs.
Ms Tuweni, and two of her business colleagues, were arrested in the Kenyan resort town of Malindi near Mombasa.
She says that on her arrival at the police station in Nairobi, an officer greeted her, saying: "Welcome, al-Qaeda".
"Just because we looked like Arabs and my partners could not speak English or Kiswahili but only Arabic, we had to be terrorists," Ms Tuweni said.
Her colleagues, from Oman, were released after being questioned in Nairobi but she says she was taken to Somalia, where she was kept in a cell which had been damaged by shells, along with 21 other people.
"For 12 days we had no food, even for some of the women who were pregnant and the little children among us."
After fighting escalated in Mogadishu, she says she was transferred to Ethiopia.
In Addis Ababa, she says she was interrogated by FBI agents, before eventually being freed without charge.
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