By Alexandra Hudson

AMSTERDAM, Feb 26 (Reuters) - The highest U.N. court rules on Monday whether Serbia committed genocide through the killing, rape and ethnic cleansing that ravaged Bosnia during the 1992-95 war, in one of the biggest cases in its 60-year history.

A judgment by the International Court of Justice in favour of Bosnia could allow the country to seek billions of dollars of compensation from its Balkan neighbour.

Serbia has said such a ruling would prove an unjust and lasting stigma on the state, which overthrew its wartime leader Slobodan Milosevic in 2000.

In Bosnia, now split between a Muslim-Croat federation and a Serb Republic, sentiment is split along ethnic lines, with Muslims hoping the court will brand Serbia an aggressor.

International law experts say the case is historic because it is the first time a state has been on trial for genocide, outlawed in a U.N. convention in 1948 after the Nazi Holocaust of the Jews.

It is almost 14 years since Bosnia first sued the rump Yugoslav state from which it seceded in 1992.

The U.N. war crimes tribunal in The Hague has already found individuals guilty of genocide in Bosnia.

Milosevic died last year, just months before a verdict in his trial on 66 counts of genocide and war crimes was due.

"I think this will be a complicated judgment and very carefully drafted," said Olivier Ribbelink, international law expert at the Asser Institute in The Hague.

BINDING RULING

A spokesman for the International Court of Justice said the judgment, which is final and binding, would take at least two hours to read.

Bosnia's Muslims and Croats followed Slovenia and Croatia in breaking away from Yugoslavia in April 1992, against the wishes of Bosnian Serbs, who were left as a one-third minority in what had previously been a Yugoslav republic ruled from Belgrade.

This triggered a war in which at least 100,000 people were killed.

Backed by the Yugoslav army, the Serbs responded by capturing two-thirds of Bosnia and besieging Sarajevo. Tens of thousands of non-Serbs were killed and hundreds of thousands were forced from their homes.

During the trial, Bosnia used evidence from the U.N. tribunal which has already ruled the 1995 Serb massacre of 8,000 Muslim men at Srebrenica, eastern Bosnia, was genocide.

Some of the men's wives, sisters and daughters have said they would stand vigil outside the court on Monday.

Serbia questioned the court's jurisdiction and disputed that Bosnian Serb wartime leader Radovan Karadzic and his military commander Ratko Mladic, both accused of genocide over Srebrenica and in hiding, were under its control.

The trial has raised questions about whether it is better to pursue individuals or states for war crimes.

Ribbelink said a key aspect of international law was that the state was responsible for the actions of its officials.

Serbia's lawyer, Radoslav Stojanovic, said he was optimistic Serbia would be found not guilty of genocide.

But he said Serbia's weak point was its obligation under the U.N. convention to prosecute perpetrators of genocide, and that Belgrade's position would be much better if Mladic had been delivered to The Hague for trial. (Additional reporting by Reuters TV and Daria Sito-Sucic in Sarajevo and Beti Bilandzic in Belgrade)

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