Controversial Russian MP3 site, AllofMP3.com, along with its hosting firm, Mediaservices, has hit back at the credit card companies that banned it from making sales last week.

Visa International and MasterCard International suspended payment functions for MP3 sales via the site over concerns about the legality of the operation. AllofMP3.com typically charges around 15 cents for a three-minute song and $2 or less for a whole CD and was claiming legality under Russian law.

But the MP3 seller has hit back at the accusations, claiming that “the action taken by the world's largest payment processors is arbitrary, capricious and discriminatory because Visa and MasterCard lack the authority to adjudicate the legality of AllofMP3's activities and its determination that the company's activities were illegal is patently erroneous and without legal merit.

“AllofMP3 has not been found by any court in the world to be in violation of any law,” the company said.

The AllofMP3 operation is becoming a major bone of contention between the US and Russia in negotiations to secure Russia a place in the World Trade Organisation.

“Visa and MasterCard should immediately re-qualify AllofMP3," said Vadim Mamotin, director general at the company. "There is no valid reason and absolutely no legal basis for the action."

Mamotin claims that Visa and MasterCard made the decision on factors other than legal grounds “since the decision was not based on an adjudicated verdict by any court in the Russian Federation or, for that matter, anywhere in the world.”

AllofMP3 said it will pursue every course of action, including legal options, to reverse Visa's and MasterCard's decision.