* Concerns 225 mln euros in debt interest
* Follows U.S. court block to any payments
* Claimants want U.S. courts to reconsider (Adds comment from Argentine economy ministry)
By Simon Jessop, Carolyn Cohn and Daniel Bases
NEW YORK/LONDON, Feb 13 (Reuters) - Investors owning euro-denominated Argentine government bonds, currently in default, won a partial victory in a London court on Friday after a UK judge ruled interest payments on the debt were governed by English law.
However, in a case that has boiled in the U.S. courts for over a decade, the judge declined to order that the 225 million euros ($257 million) held by trustee Bank of New York Mellon be distributed to the bondholders.
This decision throws the spotlight back on the U.S. court that had originally blocked the payments because BNY Mellon is subject to the jurisdiction of U.S. law.
Holders of euro-denominated Argentinian bonds now want U.S. courts to take a fresh look at the ruling, but holdout investors in New York said the decision did nothing to weaken the U.S. injunction blocking payment.
In his decision on Friday, Justice David Richards, while granting that the interest payments came under English law, also said: "It would be quite wrong for this court to make, and I do not make, any comment on such orders as may be appropriate and their effect as a matter of U.S. law."
BNY Mellon declined to comment on the ruling.
The case is just one leg of a multi-year, cross-border litigation following Argentina's sovereign debt default in 2002, after which some debtholders agreed to accept reduced payouts while others refused and took to the courts.
A U.S. court halted payments until a deal was reached between the holdout creditors and Argentina. But Argentina defied U.S. District Judge Thomas Griesa's order and in late June transferred interest payments to BNY Mellon.
Griesa ruled the payment illegal and ordered it returned. Argentina refused, leaving BNY Mellon stuck in the middle and investors without their coupon payment.
Argentina said the UK's judge's ruling vindicated its view that Griesa overstepped his competences in blocking the interest payments.
"It leaves it clear that Argentina was not and is not in default and that the money legally belongs to bondholders," the Economy Ministry said in a statement.
Claimants in London included George Soros's Quantum Partners, Knighthead Master Fund LP, RGY Investments LLC, and Hayman Capital Master Fund LP.
"We intend to use the court judgment here in the U.S. and in all other appropriate venues," said Christopher Clark, a lawyer for the euro bondholder group at the law firm Latham & Watkins.
Alberto Bernal, head of emerging markets at BullTick Capital Markets in Miami, wrote that the UK court decision is a positive for the Argentine government as it "effectively opens the window for Argentina to (once again, eventually) issue debt in Europe, even if the holdout case remains unresolved."
Argentina defaulted on its sovereign bonds in 2002. Holders of 93 percent of that debt accepted swaps in 2005 and 2010 for new paper offering around 30 cents on the dollar. A handful of hedge funds, led by Elliott Management and Aurelius Capital Management, held out for better terms and won a string of U.S. rulings pressuring Buenos Aires to settle with them.
"The UK court made clear that Judge Griesa has the authority to enjoin the payments and that UK court will not interfere with the U.S. court proceedings," said a source familiar with the holdouts' thinking.
"The exchange bondholders will not be paid until the holders of unexchanged bonds are paid. The only sensible way forward is for Argentina to stop making excuses and come to the table to negotiate a settlement," the source said.
Aurelius and Elliot both declined to comment on the ruling.
Judge Richards added on Friday that it was now up to BNY Mellon to decide "the proper time and way, if at all" to bring his judgment to the U.S. courts.
There has been no meaningful contact between the holdouts and Argentina for working out a solution in months. Investors appear resolved to wait for Argentina's elections in October for a potential change of government given President Cristina Kirchner cannot run again.
"Initially it doesn't seem like it's going to have much impact. The government hasn't reacted, it can't capitalize. The local market is already pricing in a change of government and the good that will come of that," said Ezequiel Asensio from investment bank Balanz Capital in Argentina.
Argentina's 2038 euro-denominated bond, with about 5 billion euros outstanding, rallied 1.97 cents on the dollar to 49.13 cents on Friday, pushing the yield down to 8.8 percent, Thomson Reuters data showed. ($1 = 0.8760 Euros) (Additional reporting by Chris Vellacott in London; Richard Lough, Hugh Bronstein and Walter Bianchi in Buenos Aires, Walker Simon and Nate Raymond in New York; Writing by Daniel Bases; Editing by Toby Chopra, Meredith Mazzilli and Frances Kerry)