The court decided South Cambridgeshire District Council had taken the traditional lifestyle of June Buckley into account when it would not let her stay on land she owned, and had not acted unreasonably in asking her to leave.
The decision could affect up to 400 other gypsies believed to be living illegally on their own land and last night prompted fears of a purge against them by local authorities.
However, the case could also pave the way for greater long-term security for gypsies as, in deciding to accept the case, the European Court recognised for the first time that their way of life might be protected under the European Convention on Human Rights.
Mrs Buckley and her solicitor, Luke Clements, said they would fight on. "I won't stop here," she said. "A year ago, the Government said they wanted to encourage travellers to buy their own land and develop it. Now we are starting to do it, they don't want it."
Mr Clements added: "This is the first gypsy case that has ever got to Strasbourg. It would have been lovely to win, but the court has unanimously said it will consider each case on its merits. This is the beginning of the court getting to grips with the problems gypsies face."
Mrs Buckley, 32, bought her land in Willingham, south Cambridgeshire, for pounds 2,500 in 1988 and moved on to it five years ago. She was refused planning permission for her caravan because the council believed it would detract from the rural landscape.
She complained to the court in February 1992 under the European Convention on Human Rights' article granting everyone respect for their family life and home without public interference, except where interference was "necessary in a democratic society".
In yesterday's majority ruling, the court said it had weighed her interest against the general interest of conforming to planning policy. It found "proper regard had been had to the applicant's predicament".
But campaigners believe any future appeals might succeed as life has become more difficult for gypsies since the 1994 Criminal Justice Act made it illegal to park on roads or wasteland.
Mrs Buckley, who has three children but is separated, grew up travelling around Cambridgeshire with her family. She said she was "very close to having a nervous breakdown" and the ruling would anger British gypsies. "We don't want to be treated better than anyone else, we just want to be treated the same."
Kathleen Crandall, South Cambridgeshire's legal and housing director, said the rules would be enforced. The council had granted more planning permissions to travellers on their own land - nearly 180 spaces - than any local authority.
Robert Jones, planning minister, said the Government would consider the judgment but saw no need for changes to UK planning practice. "The court has recognised the common sense of the UK position."
Hughie Smith, National Gipsy Council president, said: "I'm concerned at the decision. It may give credence to local authorities who turn down planning applications by gypsies on the weakest of excuses." There were 14,000 caravans in Britain, excluding New Age travellers.Reuse content