LONDON A tribunal ruled on Friday to remove Iran's main opposition movement from a government list of proscribed terrorist organisations.
The People's Mujahideen Organisation of Iran, a resistance group, said it was a "magnificent victory for justice", after a six-year battle to annul the listing. But the government said it was "disappointed" and it intended to appeal.
The group will stay on the proscribed list until the matter is resolved. The organisation is the armed wing of the France-based National Council of Resistance of Iran (NCRI), which says it renounced military activity in 2001.
Saaed Jalili, Iran's main nuclear negotiator who was in London for talks with the European Union, said: "It's not a good sign for a British court to take such a decision. Of course British officials that I met last night said it was not Britain's official position and they will try to rectify this."
"Even America, which is not our friend... has put it on its terrorist list," he said.
Following the judgement, Maryam Rajavi, president-elect of the NCRI, called on the European Union to echo the appeal verdict and remove the group from its blacklist.
"We have always said and repeat again that the fundamental solution to the Iranian crisis is neither foreign military intervention nor appeasement," she said in a statement.
"The solution is democratic change by the Iranian people and resistance, making it imperative to remove the barriers placed in the path of this resistance."
The Proscribed Organisations Appeal Commission ruled there was "no evidence that the PMOI has at any time since 2003 sought to re-create any form of structure that was capable of carrying out or supporting terrorist acts".
Its 144-page final judgement document said there was no evidence of any attempt by the PMOI to "prepare" for terrorism or encourage others to commit acts of terrorism.
In a letter to the PMOI last year, the home secretary said he recognised there had been a "temporary cessation of terrorist acts" but was "not satisfied that the organisation and its members have permanently renounced terrorism".
Home Office Minister Tony McNulty said on Friday the government did not accept the ruling.
"The government adopted a cautious approach in relation to the de-proscription of the People's Mujahideen Organisation of Iran," he said in a statement.
"I remain convinced that where terrorism is concerned, the rights of the law abiding majority and the overriding need to protect the public, both in the UK and abroad, must lead us to take such a cautious approach."
The PMOI, known as "the Mujahideen-e-Khalq", was added to the list of proscribed organisations under the Terrorism Act 2000 in March 2001. It first applied to be de-proscribed in June that year.
Earlier this year, it launched legal action to annul its listing as a terrorism group by the EU and to win damages.
The EU blacklist also includes the Palestinian Islamist group Hamas, Sri Lanka's Tamil Tigers and the Kurdistan Workers' Party. Blacklisting means groups are banned and have assets frozen.
The PMOI, which has bases in Iraq, began as a leftist-Islamist opposition to the late Shah of Iran, but fell out with Shi'ite clerics who took power after the 1979 Islamic revolution.
Western analysts say it has little support in Iran because of its collaboration with Iraq during the 1980-88 Iran-Iraq war.
(Editing by Matthew Tostevin)