It also seeks a halt to building while further environmental studies are done -- something that Buenos Aires has repeatedly sought in failed bilateral talks with its tiny neighbor.

The dispute came to a head after months of protests by Argentine environmentalists and residents that have cost Uruguay's economy some US$400 million. The US$1.7 billion project is Uruguay's largest-ever industrial investment.

"Argentina is fully convinced of its rights in this controversy and will continue to make every effort to assure that the environment and people's health are protected," Argentine Foreign Minister Jorge Taiana said after announcing the lawsuit.

The move comes a day before Argentine President Nestor Kirchner was due to lead a rally with governors from throughout the nation in Gualeguaychu, the epicenter of protests against the mills where some 100,000 people demonstrated last weekend.

Uruguay says the pulp companies, Finland's Metsa-Botnia and Spain's Ence, will use the latest technology to avoid polluting.

Last month, the World Bank's private sector arm decided to withhold approval of about US$400 million in funding for the mills until it completes studies on the project's social and environmental impact.

World Bank President Paul Wolfowitz on Wednesday urged the leaders of Argentina and Uruguay to renew talks to find a solution to the conflict.