The University of Sussex has won an appeal against a record £585,000 fine and ruling it had infringed on lawful freedom of speech.
Last year the Office for Students (OfS), the regulator of England's universities, handed down the fine and claimed the university had breached its trans and non-binary inclusion policy.
The OfS investigation came after Kathleen Stock left her job as professor of philosophy at Sussex, following protests from students over her view that gender was not more important than biological sex.
The vice-chancellor of Sussex said the new High Court ruling raised serious questions about the regulator, while the OfS described the outcome as "disappointing".
The High Court case did not consider what happened to Stock, but rather how the OfS reached its decision over the fine.
High Court judge Mrs Justice Lieven ruled on Wednesday on whether a proper process was followed in issuing the fine.
It was handed down to the university in March 2025 on the basis of Sussex's trans and non-binary policy, which included a requirement to "positively represent trans people" and warned against "transphobic propaganda".
In court, the University of Sussex had argued the trans and non-binary policy was not what is called a "governing document" and did not have the importance attached to it by regulator the OfS.
This concern was upheld by Wednesday's judgment, along with several other aspects of the process.
Perhaps most damaging for the regulator - meant to oversee freedom of speech - was that the accusation of bias in the process was also upheld.
Mrs Justice Lieven said the OfS had "closed its mind" to anything other than a finding that the university had failed to uphold freedom of speech.
The regulator was also found to have taken a flawed approach to deciding what was academic freedom.
The OfS told the BBC that it did not accept this and instead said it needed to improve how it recorded its decisions.
The regulator's chairman said he would consider over several weeks whether to appeal against the High Court ruling.
As part of the investigation that led to the fine, the OfS interviewed Stock, but the court had heard it did not meet anyone from the university in person despite requests from the institution to discuss concerns.
Last August, a new freedom of speech law covering England's universities came into force giving the regulator even stronger powers.
A complaints system will allow academics and visiting speakers to directly raise concerns with the OfS from this autumn.
From April 2027, universities could face fines of £500,000 or 2% of their income if they are found to have failed to protect free speech.
The vice-chancellor and president of the University of Sussex, Prof Sasha Roseneil, said: "I am delighted that Sussex's foundational commitments to academic freedom and freedom of speech have been recognised by the High Court."
She added: "It is a devastating indictment of the impartiality and competence of the OfS, implicating its operations, leadership, governance, and strategy. It raises important and urgent questions for the government as it plans to grant ever more powers to the regulator."
Josh Fleming, interim chief executive of the OfS, said it would "carefully consider the consequences of the judgment before deciding on next steps".
He said: "Our focus remains on students and the sector, and we are pleased that following our investigation a dozen institutions, including the University of Sussex, have amended policies which restricted freedom of speech.
"As a result, students and academics should feel greater confidence in their ability to engage in the free and frank exploration of thought that characterises English higher education."
Vivienne Stern, the chief executive of Universities UK, which represents over a hundred institutions, said universities wanted to "work closely with the Office for Students to reset relationships and rebuild trust".
A statement continued: "Effective regulation depends not just on enforcement, but on trust, clarity, and a shared understanding of respective roles."
