Italian vessels picked up the migrants in the Mediterranean Sea and returned them to Libya, where they were handed over to authorities.
The European Court of Human Rights ruled Thursday that the migrants risked ill treatment in Libya, where it said such migrants are systematically detained. They also risked being sent back to Somalia and Eritrea, where they might be detained or even tortured, according to the court.
The court also said Italy violated a prohibition against mass expulsions since it did not examine their cases.
It ordered Italy to pay each of the migrants $20,000 and additional funds to be shared to cover costs. The court noted that the migrants have since scattered and lawyers have lost touch with some of them. It was not clear how payment would be made in those cases.
The U.N. High Commissioner for Refugees long condemned what it called the "push-back on the seas" policy, in which migrants were intercepted at sea without screening for asylum.
The policy is dated to a friendship treaty signed in 2008 by then Libyan leader Moammar Gadhafi and former Italian Premier Silvio Berlusconi in which Libya pledged to help Italy crack down on illegal immigrants.
It was not immediately clear if the present government of technocrats would appeal.
"We shall see. The government will decide," said Andrea Riccardi, Cabinet minister for international cooperation.
A prominent Rome-based Catholic organization which helps immigrants hailed the decision as "historic."
The Sant'Egidio Community said in a statement that the decision "can help to reduce deaths in the Mediterranean."