BRUSSELS, May 10 (Reuters) - Iranian resistance group, the People's Mujahideen Organisation of Iran, has launched legal action to annul its listing as a terror group by the European Union and to win damages, it said on Thursday.

The European Court of First Instance last year thwarted an EU move to freeze the funds of the PMOI, the armed wing of France-based National Council of Resistance of Iran (NCRI) which says it renounced military activity in 2001.

But the 27-nation bloc has kept the group on its blacklist, saying the court, Europe's second highest, annulled an old list and not its most recent version, where the group also appears.

The PMOI has bases in Iraq. It began as a leftist-Islamist opposition to the late Shah of Iran but fell out with Shi'ite clerics who took power after the 1979 Islamic revolution.

"The PMOI's claim is for annulment, damages amounting to over 1 million euros ($1.35 million) and costs," the group said in a statement released at a news conference in Brussels.

The court had annulled the bloc's decision to blacklist the group for failing to give a fair hearing or adequate reasons.

The EU has since sent the group a letter explaining its reasons and EU foreign ministers agreed last month to inform groups and people in future why they are put on its list of terrorist organisations.

The NCRI has dismissed that response as cosmetic and accuses the EU of seeking to appease the Iranian leadership as part of its efforts to get Tehran to negotiate over a nuclear programme the West suspects is a cover for making an atom bomb.

The EU blacklist includes the Palestinian Hamas group, Sri Lanka's Tamil Tigers and the Kurdistan Workers' Party (PKK). Blacklisting means groups are banned and have assets frozen.

David Vaughan, a British lawyer representing the PMOI, told reporters the group had asked the Court of First Instance to examine the legal dispute as a priority.

However he acknowledged there was little chance of the court imposing sanctions on the European Council, the EU body responsible for the listing, even if its interpretation was deemed incorrect.

"But then there would be a big legal battle," he said.

The PMOI is said by Western analysts to have little support in Iran because of its collaboration with Iraq during the 1980-88 Iran-Iraq war.

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