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* Former Italian PM told to sell down Mediolanum stake
* Berlusconi deemed unfit after tax fraud conviction
By Francesco Canepa
FRANKFURT, April 26 (Reuters) - Former Italian Prime Minister Silvio Berlusconi has accused the European Central Bank (ECB) of violating his rights by ordering him to reduce his large stake in Italy's Banca Mediolanum because of his criminal record, court records show.
It is the first time an ECB decision to restrict a bank shareholder has been appealed at the European Court of Justice, and one of the most high-profile challenges to its authority as the euro zone's top banking watchdog.
The ECB in October ruled against Berlusconi's holding of a 30 percent stake in Mediolanum via his Fininvest vehicle, deeming the businessman unfit to own more than 10 percent of a bank after being convicted for tax fraud.
Fininvest's voting rights in Banca Mediolanum exceeding that threshold have since been frozen as a result, Italy's market regulator said at the time.
In the appeal lodged with the ECJ, Berlusconi said the ECB's decision was disproportionate and violated his freedom to do business and own property, two fundamental rights in the European Union "derived from the European Convention on Human Rights".
"The contested decision ... compel(s) a person to sacrifice a private interest for the public good, requiring the forced sale of a substantial shareholding," Berlusconi and Finivest said in the appeal.
Berlusconi and Fininvest also argue that the ECB misapplied EU banking rules, including by applying secondary legislation retroactively.
The ECB declined to comment on the case.
The Bank of Italy ordered Fininvest to sell a stake of just over 20 percent in 2014 but the decision was later overturned by an Italian court.
The ECB, which took over as bank supervisor in late 2014 as part of Europe's response to the financial crisis, was called to rule again on the matter after a merger between asset manager Mediolanum and its banking unit, Banca Mediolanum, in 2015.
Four-time prime minister Berlusconi is banned from holding public office until next year due to his conviction.
In another sign of the resistance faced by the ECB to its new role as supervisor, France's top lenders recently sued the central bank to get an exemption from holding capital against deposits parked with a state-owned fund. (Reporting by Francesco Canepa; editing by Andrew Roche)