THE HAGUE, Feb. 26 -- The United Nations' highest court on Monday cleared Serbia of genocide against Muslims in Bosnia's bloody 1992-95 war. But it said the country's former government should have stopped the July 1995 slaughter of more than 7,000 Muslim men and boys in Srebrenica and ordered Serb leaders to hand over the alleged architect of the massacre.

The case marked the first time a state had been taken to court over allegations of genocide, outlawed by a U.N. convention in 1948 after the Nazi Holocaust. Individuals have been convicted in genocide cases linked to massacres in Bosnia and Rwanda.

In a 171-page ruling, the International Court of Justice said the massacre of thousands of Muslims by Bosnian Serb forces at the U.N.-protected Srebrenica enclave was an act of genocide.

But the 15-judge panel rejected Bosnia's claim that the Serbian state was responsible for the killing, saying it did not have effective control over the Bosnian Serb forces it had helped arm and finance. Instead, the judges ruled that Serbia stood by and allowed the massacre to happen.

Serbia, "could, and should, have acted to prevent the genocide, but did not," the court's president, Rosalyn Higgins, told reporters.

The ruling sparked outrage in Bosnia, which filed the case, and among dozens of war survivors who gathered outside the gates of the International Court of Justice.

"Shame on the people who reached such a verdict. How can they say not guilty of genocide when there are photos, video footage?" Zinaida Mujic, of the Mothers of Srebrenica association, said in Sarajevo.

The Srebrenica massacre was the worst mass killing in Europe since World War II and the bloodiest episode in the violent breakup of Yugoslavia into six independent states, including Bosnia, Serbia and Croatia. The fighting started in Slovenia in 1991, spread to Croatia in 1992 and Bosnia the same year, leaving at least 200,000 dead. In the Bosnian war, Muslims, Catholic Croats and Orthodox Serbs fought one another.

Higgins also condemned Serbia's failure to hand over Bosnian Serb Gen. Ratko Mladic, indicted more than a decade ago by the International Criminal Tribunal for the former Yugoslavia for the genocide in Srebrenica.

The court said there was "plentiful, and mutually corroborative, information suggesting that Gen. Mladic . . . was on the territory of [Serbia] at least on several occasions and for substantial periods during the last few years and may still be there now."

The order to arrest Mladic and other genocide suspects was part of the binding judgment in the case. Failure to comply can be reported to the U.N. Security Council. However, international officials have been pushing Serbia to hand over Mladic for nearly 12 years without success.

The European Union has made Serbia's hopes for membership conditional on its cooperation in handing over Mladic and other fugitives.

Although Higgins mentioned Mladic by name, his accused accomplice, former Bosnian Serb leader Radovan Karadzic, was not so cited. Karadzic is believed to be hiding in the Serb-controlled portion of Bosnia, out of Serbia's reach.

Last week, international forces in Bosnia raided the homes of Karadzic's son and daughter, saying they were suspected of supporting their fugitive father.

Serbia's president, Boris Tadic, welcomed Monday's court ruling and said cooperating with the Yugoslav war crimes tribunal in handing over Mladic was key to the country's future.

"Unless Serbia finally wraps up that cooperation . . . I believe, as a state, it will face dramatic political and economic consequences," Tadic said.