Football fans will potentially be able to watch cut-price Premier League matches, after the European Union's highest court ruled on Tuesday that it is not illegal for individuals to buy set-top box decoder cards from foreign broadcasters.

The European court of justice ruled that the FA Premier League cannot stop individuals from seeking better deals for TV sports subscriptions than that offered by BSkyB – which paid more than £1bn for the UK broadcast rights for Premier League matches – from foreign broadcasters.

The ECJ said attempting to prohibit the "import, sale or use of foreign decoder cards is contrary to the freedom to provide services and cannot be justified either in light of the objective of protecting intellectual property rights or by the objective of encouraging the public to attend football stadiums".

However, the court ruled against the bid by Karen Murphy, the landlady of the Red, White and Blue pub in Portsmouth, to be allowed to use a Greek decoder card to show live Premier League matches to pubgoers at much cheaper rates than BSkyB charges commercial premises in the UK on copyright grounds.

The ECJ said the transmission in a pub is a "communication to the public", which means that without the permission of the Premier League Murphy is in breach of the copyright directive. This directive would not stop individuals buying foreign decoder cards for domestic use.

However, the ECJ said live match coverage itself was not covered by copyright protection, although the Premier League could claim ownership of FAPL-branded opening video sequences, theme music, on-screen graphics and highlights of previous matches.

This means that as long as the FAPL and BSkyB ensure that match coverage includes enough copyright elements pubs will not be allowed to show foreign broadcasts.

The Premier League, which sells TV rights exclusively to broadcasters across Europe on a territory-by-territory basis, has been clamping down on British pubs buying in live coverage from foreign broadcasters.

The ECJ ruling could potentially have a huge impact on the way BSkyB and other UK and European broadcasters buy rights to sport, films and foreign TV shows. Sky's share price was down by just over 3% to 635.50p at about 9.20am on Tuesday, as the City reacted to the European ruling.

BSkyB makes about £200m a year in revenue from selling subscriptions to pubs and other commercial premises.

The broadcaster has about 44,000 pub, club and office subscribers. It is thought that pub owners like Murphy pay about £1,000 a month for a BSkyB subscription. Murphy slashed these costs by buying a Greek decoder card and a subscription to Nova reportedly at a cost of about £800 a year.

"This is a clear statement from Europe that intellectual property rights cannot be relied upon to fragment the market and charge different prices in different EU countries for the same content," said Toby Headdon, an intellectual property lawyer at Berwin Leighton Paisner. "The decision looks set to change the licensing landscape in Europe, not just for football broadcasts but potentially for other content such as films and music."

The ECJ also opened the door for the dismantling of the FAPL's country-specific sports rights regime, stating that such a system of selling matches to broadcasters is "irreconcilable" with the aim of EU law to create one internal market.

"Payment by the television stations of a premium in order to ensure themselves absolute territorial exclusivity goes beyond what is necessary to ensure the right holders appropriate remuneration," the ECJ said in its ruling. "Such a practice may result in artificial price differences between the partitioned national markets. Such partitioning and such an artificial price difference are irreconcilable with the fundamental aim of the treaty, which is completion of the internal market."

The ruling could force the FAPL to look to sell its broadcast rights as a pan-European TV deal, most probably to Sky, although it could look to limit sales to some European markets.

The Premier League will make more than £1.6bn in the UK from its current three-year deal with BSkyB and has a separate deal in this country for live match coverage with ESPN, along with a highlights deal with the BBC for Match of the Day.

The Premier League is believed to have made well in excess of £1bn in TV deals outside the UK for rights covering 2010 to 2013, almost double the £625m made under the previous deal period, with the popularity of the top English division booming in territories including the Middle East, north Africa, Hong Kong and Singapore.

No figures are given for Europe, but it is understood that France, Scandinavia and Germany are the most lucrative markets for Premier League rights.

The Premier League said in a statement: "The areas of law involved are complicated and necessarily we will take our time to digest and understand the full meaning of the judgment and how it might influence the future sale of Premier League audio-visual rights in the European Economic Area.

"We are pleased that the judgment makes it clear that the screening in a pub of football-match broadcasts containing protected works requires the Premier League's authorisation. Currently only Sky and ESPN are authorised by the Premier League to make such broadcasts.

"The Premier League will continue to sell its audio-visual rights in a way that best meets the needs of our fans across Europe and the broadcast markets that serve them but is also compatible with European Law."

A BSkyB spokesman said: "This is a case about the licensing arrangements of bodies like the Premier League. It will have implications for how rights are sold across Europe in future, which we are considering. As a broadcaster, it will remain our aim to secure high-quality content for our customers based on the rights available to us."

The UK high court of justice will now make the final decision applying this ruling to the actual case of Karen Murphy, but the ECJ's decision is final and cannot be appealed against.

Europe's commissioner for the digital agenda, Neelie Kroes, vowed to sort out confusion surrounding cross-border access to film, music and pay-per-view football games.

In a speech prepared before the verdict backing Murphy, she told a thinktank audience that "invisible barriers" remained in the distance-selling of "digital goods".

She went on: "If I can buy a music CD online from a company in the Netherlands and have it posted to me here in Belgium, why can't I buy a digital download from the same company?

"If I can watch my local team's football matches using online pay-per-view in one member state, why not in 27?

"This situation does not make much sense to the man on the street. To be honest, it is not a situation that makes much sense to me. And we need to fix it."

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