The PMOI, founded in 1965, wants to oust Iran's religious leaders
A top European Union court has annulled an EU decision to freeze the funds of a prominent Iranian opposition group.
The People's Mujahideen Organisation of Iran (PMOI) was put on the EU's terror blacklist in 2002, which meant the EU could block the group's finances.
But the Luxembourg-based Court of First Instance ruled on Thursday that the EU's decision was wrong.
The verdict follows an appeal by the group after a British court had ruled in its favour last year.
The Court of First Instance - the EU's second-highest court - said in its ruling that the EU's "statement of reasons is manifestly insufficient to provide legal justification for continuing to freeze the PMOI's funds".
It added that the EU statement was based on the UK home secretary's intentions to appeal against the British court decision of 2007.
The Luxembourg-based court also annulled an EU decision of December 2007 to keep the PMOI on its terror blacklist.
However, the EU updated its blacklist in July - keeping the Iranian group on it - and the court is still due to rule on the PMOI appeal to be excluded from the new list.
The PMOI was set up in 1965, with the aim of replacing the Shah of Iran.
The PMOI has had an armed wing operating in Iran, but the group is now based in exile.
In 2001, the group announced that it was renouncing all military activity.