Kosovo scored a significant victory in its struggle to be recognised as a full and legitimate state yesterday when the United Nations' highest court ruled that its 2008 declaration of independence did not break international law.

Serbia denounced the judgment - more than a decade after it fought a civil war over its former province - and warned the ruling would encourage separatist movements around the world.

The ruling sets the stage for Kosovo to renew its appeals for further international recognition. The tiny Balkan country has been recognised by 69 countries, including the United States and most European Union nations. It needs 100 for full statehood and the Kosovo Government urged its Serbian counterparts to hold further talks on its future.

"Kosovo's historic victory should not be felt as loss in Belgrade," Kosovo Prime Minister Hashim Thaci said, before calling the ruling by the International Court of Justice "the best possible answer for the entire world". Serbia, backed by its hefty ally Russia, vowed that it would continue its battle for the province that it considers the cradle of its nation and its Orthodox religion. The ruling was broadcast live on major Serbian TV stations and the bells of all Serb Orthodox churches in Kosovo tolled at 5pm in protest at the ruling.

"Serbia will never recognise the unilaterally proclaimed independence of Kosovo," Boris Tadic, the President, told reporters in Belgrade. "The Government will now consider further steps."

But Tadic said that Serbia would propose a "compromise" on Kosovo at a UN General Assembly meeting in September. "The only sustainable solution is the one accepted by all sides," he said.

Amid fears of a violent backlash against the ruling, Nato-led troops increased their presence in Mitrovica, a Serb-controlled northern city in Kosovo. The declaration in 2008 triggered a furious reaction with nationalists setting fire to the US Embassy in Belgrade. Serbia lost control over Kosovo in 1999 after 11 weeks of Nato bombing of Serbia to halt the oppression of 2 million ethnic Albanians.

In its ruling delivered yesterday, the UN court said that Serbia had "lost any jurisdiction" over Kosovo in 1999 when a UN administration took over after the war. UN-sponsored talks on the status of Kosovo between Pristina and Belgrade collapsed in 2007. Fewer than 100,000 Serbs live in Kosovo, most of them based in the north. The city has a total population of over 2 million. Backed by Belgrade, the Serbs strongly oppose the imposition of Pristina's rule. As celebrations began in Pristina, around 1000 Serbs gathered in Mitrovica for a protest that passed off peacefully.

Kosovo Serb Tihomir Markovic called the ruling shameful.

"Justice is on our side, God is on our side," he said. "After this it will be hard for us - the Serbs in Kosovo."

After failing to prevent the declaration of independence, Serbia brought the case, claiming that the secession violated its territorial integrity and was against the principles of international law. The non-binding opinion of the court - passed in a 10-4 vote by court judges and read by court president Hisashi Owada - said that international law contains "no ... prohibition of declarations of independence" and therefore Kosovo's declaration "did not violate general international law."

- Independent