Independent TD Michael Lowry has won an appeal against the Moriarty Tribunal's refusal to award him two thirds of his costs.
The Court of Appeal ruled there was an absence of transparency in how a decision was reached and that he was not given an opportunity to address it.
It also ruled the decision on costs contained "a judgment of moral quality" and was "a quasi penalty or sanction" which was not open to a tribunal.
However, the appeal court refused to overturn a decision that he had failed to cooperate with the tribunal.
The issue of costs has been referred back to the tribunal.
Mr Lowry had appealed a decision of the High Court after it refused to order the tribunal to pay the full costs of his participation in the inquiry.
Today, the Court of Appeal found the High Court had made a factual error and that the tribunal had not used a rational way to calculate the costs awarded to him.
The President of the Court of Appeal Mr Justice Sean Ryan said the tribunal had decided to refuse Mr Lowry his costs for representation in modules where there was no allegation of non-cooperation.
He also said it was impossible to ascertain the reason or how the amount was determined by the tribunal.
The three judge court found the tribunal had failed to give reasons and failed to provide a basis for evaluating the reasonableness and proportionality of what was "a radical decision with far reaching ramifications for Mr Lowry and for his professional advisers."
It also found that Mr Lowry was not given an opportunity to address this failure.
The tribunal was set up in 1997 to investigate payments to Mr Lowry and former taoiseach Charles Haughey.
Mr Lowry's costs for participation in the inquiry were expected to run to several million euro.
The decision to refuse him two thirds of his costs was based on a finding of non-cooperation.
The tribunal said he had knowingly provided it with false information with a view to misleading it which had the effect of delaying the inquiry.
The High Court said this finding was based "on a litany of falsification and deception by the TD" in his dealings with the tribunal.
The High Court also said he was out of time to appeal against the finding of non-cooperation.
In its ruling today, the Court of Appeal found the High Court had made a factual error and appeared to be under the impression that Mr Lowry had failed to cooperate with two thirds of the tribunal's work.
The GSM module of the inquiry with which Mr Lowry had fully cooperated in fact took up two thirds of the inquiry, where as the "money trail module accounted for one third, the judgment said.
The Court of Appeal found all of the findings of non-cooperation related to the money trail module and none were related to the GSM licence module.
The three judge court said Mr Lowry's claim that he was treated differently to Mr Haughey and Ben Dunne in relation to costs was met with a "less than convincing response" by the tribunal.
The court said parties were entitled to look for consistency in such matters and the process should be fair and reasonable.
While the court was not saying the tribunal had to find in favour of Mr Lowry in the same way, fair procedures required sufficient notice to enable Mr Lowry to address the real issues.
The court ruled the tribunal "fell into error" in failing to identify some rational mode of calculation.
The ruling said he had been professionally represented at the tribunal for 15 years and had incurred an enormous liability for costs which would be beyond the capability of all but the super rich to discharge from their own resources.
It added: "Beyond Mr Lowry was the position of the advisers themselves whose interests did not fall to be considered independently but it is at least arguable that in considering Mr Lowry's position and the rights and wrongs of reducing his costs, the fact that his advisers would go unpaid for many years work does not seem wholly irrelevant."
The tribunal had decided to refuse Mr Lowry his costs for representation in modules where there was no allegation of non-cooperation.
It also said it was impossible to ascertain the reason or how the amount was determined by the tribunal.
It also found that Mr Lowry was not given an opportunity to address this failure.
"Fairness does not require mathematical precision but in this situation it did demand that Mr Lowry be given an opportunity of dissuading the tribunal from making such a swingeing deduction from his costs," the court said.
It also said the "moral turpitude" expressed in relation to the findings of non-cooperation was irrelevant and the reduction decided upon by the tribunal included a judgment of moral quality of the non-cooperation.
That was impermissible as a quasi penalty or sanction that was not open to a tribunal.
The court held that Mr Lowry had not reached the high threshold required to challenge the tribunal's findings of non-cooperation and said the tribunal was not in breach of the obligations of fair procedures in relation to that finding.
The court said the tribunal had given notice of this to Mr Lowry in 2012 and he had been given an opportunity to make submissions.
