A lawyer acting for the UK Government has told a panel of judges that "there is no right to compensation simply because someone has been acquitted".
The European Court of Human Rights in Strasbourg is hearing the case of Lorraine Allen from Derbyshire who wants compensation after being wrongly convicted of killing her baby son.
Lorraine Allen was accused of shaking four-month-old Patrick to death and convicted of his manslaughter in 2000.
The conviction was quashed in 2005, after fresh medical evidence proved it to be unsafe.
Her application for compensation was rejected by the Home Secretary, a decision later upheld in a subsequent judicial review and appeal.
The case is now being considered by a panel of judges in Strasbourg.