The Lord Chief Justice, Lord Bingham, said the publication of two extracts from the documents did not constitute contempt, nor had there been any intention by the newspaper to interfere with the course of justice.
The documents were central to the quashing of the convictions of four men who ran Ordtech, an arms technology company. The Court of Appeal ruled in November 1995 that they had not received a fair trial because the papers - which suggested the Government turned a blind eye to exports of arms to Iraq - had been withheld from the defence.
Reporting the outcome of the appeal, The Independent reproduced fragments of an intelligence report and a Foreign Office memorandum. The Attorney-General argued that this was in contempt of a court order that said the documents should be disclosed only for the purposes of the appeal. He applied to have the newspaper fined and sought jail sentences for Ian Hargreaves, its former editor, and Chris Blackhurst, its former Westminster correspondent.
However, Lord Bingham, in in a judgment handed down yesterday after a hearing earlier this week, said there had not been a "significant and adverse effect on the administration of justice".
He went on: "Recognising that the restraints upon freedom of expression should be no wider than are truly necessary in a democratic society, we do not accept that conduct by a third party which is inconsistent with a court order in only a trivial or technical way should expose a party to conviction or contempt."
Philip Havers QC, counsel for the Attorney-General, had submitted that although the court order was directed at the four men and their lawyers, it was also binding on third parties such as the media.
Lord Bingham noted that both Mr Hargreaves, now editor of the New Statesman, and Mr Blackhurst, now assistant editor of the Independent on Sunday, had denied knowledge of the order. "We are in no doubt that their denials are truthful and accurate," he said.
However, there was uncertainty, he said, about whether David Hellier, the reporter who was in court for the appeal judgment, had reported to his superiors an exchange in which the prosecution counsel reminded the appeal judges about the existence of the order.
"According to his affidavit, he reported the exchange which had taken place in court," Lord Bingham said. "There is, however, considerable doubt whether he reported what counsel said at the conclusion of the judgment, including the reference to the order of 17 July, and on balance we are inclined to think that he did not."
He said that journalists had made "a bona fide attempt to ascertain whether there was any restriction on publication of the documents. We conclude that Mr Hargreaves believed that the newspaper could properly publish extracts from documents quoted in the judgment of the court without infringing any order it had made."
Mr Hargreaves said afterwards: "This action by the Attorney-General was an attempt to narrow ... the freedom that journalists have to report contentious legal matters."
He said he believed that courts would have to be much clearer in future about what restrictions they intended to impose on reporting.