Prisoners barred from voting will not be able to press for compensation claims in Britain, after a high court ruling turned their bids down.
Government lawyers successfully attempted to block the 568 claims on the grounds that they should be heard in Strasbourg, not Britain's domestic courts.
The ECtHR had earlier ruled that Britain's refusal to enfranchise prison inmates breached the European Convention on Human Rights (ECHR).
But in a free vote on the issue earlier this month, MPs voted 234 to 22 in favour of defying the court.
Ministers must now decide whether to defy the ECtHR over the issue. Pressure on David Cameron is only set to increase after the publication of secret government legal advice earlier today.
Extracts from a document entitled 'prisoner voting: the consequences of non-compliance' made clear that Britain would probably be able to escape serious censure for refusing to give prisoners the vote.
"The direct sanctions for failure to comply with Strasbourg judgment are political rather than judicial," the leaked government document stated.
"We are not aware of any country that has been expelled from the [European] Council for non-execution of a judgment."
In addition to the hundreds of millions of pounds the government could be forced to pay in compensation payments, Britain would also "lose international credibility" on human rights issues, the document added.
It warned: "In the Council of Europe, our ability to press other states to implement human rights judgments (eg Russia on Chechnya) would be completely undermined."
The developments came after the ECtHR's president, Jean-Paul Costa, expressed doubt that Britain would dare to defy his court.
"The only country which denounced the Convention [on Human Rights] was Greece in 1967 at the time of the dictatorship of the colonels," he said.
"I cannot imagine, even if I can understand some irritation, that the UK, which is a great country, could be in the same situation as the colonels in 1967."
His comments were greeted with scorn by Conservative backbencher David Davis, one of the key figures pressing the prime minister to defy the court.
"It is farcical to compare the oldest democracy in Europe with a military dictatorship," he told the Telegraph newspaper.
"No one has any argument with the Convention as originally drafted and signed but that does not give the court the right to add on any authorities it sees fit. And it does not give the court the right to be insulting."