PARIS (Reuters) – A French court on Wednesday ordered the country's customs agency to release an impounded yacht owned by a Russian billionaire hit by European sanctions, due to procedural errors made during the seizure of the vessel.

Customs agents seized the 27-metre "La Petite Ourse" on March 16, after its owner, Alexey Kuzmichev, one of the main shareholders of Russia's Alfa Bank, was sanctioned by the EU in March for his ties to President Vladimir Putin.

The Paris Appeals court ruled that customs officers had not followed correct procedures when they boarded the vessel, which was moored in the Cote d'Azur town of Antibes.

The agents had cited a fraud investigation when they presented themselves to shipyard authorities, which under French law permits customs to search a vessel.

The ruling underlines the challenges faced by European nations in freezing the assets of Russian oligarchs.

Kuzmichev sued the French authorities in an effort to win back access to his two yachts held in France, La Petite Ourse and La Petite Ourse II.

As a sanctioned individual whose assets are frozen, Kuzmichev is still prohibited from taking La Petite Ourse out of French territorial waters, but he is now allowed to access the yacht and use it within French waters, his lawyer said.

"Inside [of France], he is allowed to move around, whether by foot, by horse, by car or by boat," lawyer Philippe Blanchetier said.

The court also ordered that French customs pay the tycoon 10,000 euros in compensation.

The customs agency declined to comment immediately.

A court in Rouen will rule on the second vessel, La Petite Ourse II, moored in Cannes, at a later date.

(Reporting by Layli Foroudi in Paris; Editing by Richard Lough and Matthew Lewis)

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