Record companies say AllofMP3 has no rights to sell music

The Russian-based company offers chart music at a fraction of the price charged by services such as iTunes.

The firm used an online forum to assert that it obeyed Russian laws and paid royalties to a Russian organisation.

But US officials insisted AllofMP3 operated outside international agreements and no artists had been given royalties.

Vadim Mamotin, director general of Mediaservices, which owns AllofMP3, said: "The company has been unfairly characterised as a pirate website. Nothing could be further from the truth."

Artists 'exploited'

He added the company paid royalties to the Russian Multimedia and Internet Society (ROMS) but the organisation's offers of payment to artists had been rebuffed.

Through an interpreter, Mr Mamotin claimed the major record companies had done this to "gain additional leverage before negotiating with us or ROMS".

However he did indicate Mediaservices was prepared to "deal directly with artists and record labels".

But the International Federation of the Phonographic Industry rejected this, saying neither Mediaservices nor ROMS had the authority to sell music or collect and distribute royalties.

Spokesman Adrian Strain said: "They haven't respected the rights of the rights holders and have exploited their works without asking permission."