Brokers had wanted to sell the £17million craft - which has everything from a mosque to a mini-submarine and missile launcher - to British or American millionaires, claiming Saddam gave it to the Saudi royal family and then King Abdullah of Jordan.
Cayman island firm Sudeley, part-owned by King Abdullah, told a French commercial court in Nice that it is the legal owner.
But Iraq said it belonged to them.
Now the court - where the yacht is moored close to Saddam's abandoned villas - has ruled Sudeley failed to produce "a single document that establishes ownership by King Abdullah". Amir-Aslani, Iraqi counsel in Paris, said: "Ownership has been ceded to Iraq and our ambassador has come to Nice to put the Iraqi ensign on the boat."
The vessel is an astonishing testament to the tyrant's playboy lifestyle.
It is decorated with mahogany, gold, silver and marble, has a helicopter pad, health clinic with operating theatre, prayer rooms, fountains, gold tapped bathrooms, Jacuzzis, steam rooms, hi-tech entertainment and games cabins. Up to 200 could banquet in a bulletproof glass atrium.
Built in Denmark in 1981, it was named Qadissivat Saddam after a victory over the Persians in 637AD.
Renamed Basra Breeze, it is due to sail to Iraq in days."
