The court ruled that the EC''s ruling to limit business between the two diamond producers was "clearly disproportionate," and added there was no evidence to show that the two companies together held a "dominant position" in the EU market that could have justified the restraints it sought to impose on the company.

"The decision produces effects which are disproportionate in the light of the objective pursued by Article 82 EC of maintaining undistorted competition. It completely rules out the possibility previously open to Alrosa of entering into a contractual relationship with De Beers," the court said.

The EC claimed that De Beers held an unchallenged position on the diamond market and it assumed legally binding commitments to stop buying rough diamonds from Alrosa, a ruling that Alrosa challenged at the Luxembourg-based court, saying the case lacked merit.

Following the European Commission''s decision, Alrosa and De Beers signed a memorandum on supplying rough diamonds in 2006-08, gradually phasing out De Beers'' purchases.

Under the agreement, De Beers was to purchase €500 million worth of rough diamonds from Alrosa in 2006, €420 million in 2007 and €340 million in 2008.

De Beers controls about 60 per cent of the world''s rough diamond supplies and produces 43 per cent of world output.

De Beers faced fines of up to 10 per cent of its total turnover if it failed to adhere to the EU antitrust agreement.