DUBAI—The European Union’s top court on Thursday upheld a contention by Iran’s Bank Mellat that it was improperly sanctioned for six years without sufficient evidence of its involvement in the Islamic Republic’s nuclear program.

The European Court of Justice said there wasn’t enough evidence to back up the European Council’s contention that Bank Mellat was involved in Iran’s nuclear and ballistic missile programs because it was the parent company of another sanctioned entity called First East Export.

The court also rejected the Council’s contention that it couldn’t provide evidence of Bank Mellat’s involvement because it came from confidential sources whose safety could be compromised if they were identified, the ECJ said.

The decision isn’t open to appeal and could give rise to a claim for damages, according to the bank’s lawyers. The victory follows a similar win for Bank Mellat in the U.K., where it is seeking $4 billion worth of damages for being improperly targeted.

Sarosh Zaiwalla, a London-based lawyer representing the bank, called the decision a significant one, though he said the EU damages claims might be wrapped together with those it is pursuing in the U.K.