The Baikal Pulp and Paper Plant, which is located next to the world's largest body of fresh water, Siberia's Lake Baikal, recently switched its production process to a closed water cycle after coming under pressure over waste discharges into the lake.
The court's decision may be appealed within a month.
The Baikal pulp mill and Rosprirodnadzor were expected to reach a settlement agreement on the lawsuit on Thursday. Under the agreement, the plant would have to admit to violations and undertake additional environmental commitments.
However, during the court hearing a spokesman for the Baikal pulp mill called the document a "one-sided" saying: "We did not violate the law, and Rosprirodnadzor could not prove in court that we inflicted damage to Lake Baikal."
In December 2007, Rosprirodnadzor filed a $150 million lawsuit after the plant's license for water consumption expired. However, in September this year the regulator lowered the sum to $15.6 million, after the plant switched its production process to a closed water cycle.
The Baikal pulp mill, which produces 200,000 metric tons of pulp and 12,000 metric tons of paper per year, has discharged large volumes of toxic waste into the lake since it was built in the 1960s.
