LUXEMBOURG (Reuters) -- Europe's second-highest court on Tuesday annulled an EU decision freezing the funds of Mojahedin Khalq Organization (MKO)that argues it was wrongly placed on the European Union's list of terrorist organizations.

The decision is likely to have wider implications for the EU's policy of banning alleged terrorist groups and freezing their assets.

EU member states ordered the freezing of funds of the MKO in 2002. The armed wing of the France-based National Council of Resistance of Iran (NCRI) has claimed that it has renounced military activity since 2001.

The European Court of Justice (ECJ) decisions are binding on member states, but would not preclude decisions by individual governments to keep the group on their own terror lists.

An EU spokesman declined immediate comment, saying legal experts were studying the judgment.

In addition to many terror acts, the MKO sided with Saddam Hussein in the 1980-88 Iran-Iraq war.