The Alliance for Direct Democracy in Europe had been asked in 2016 to repay 172,655 euros (about $190,000) and denied a further 500,616 euros ($555,000) in EU grants after the European Parliament ruled it had misspent EU funds on Farage's party's domestic campaign in Britain, breaking the bloc's spending rules.
The now defunct ADDE brought the case to court, arguing that the Parliament bureau responsible for the decision did not include a single representative of "euroskeptical" parties, and that a member of the body made hostile comments toward the party before the decision was made.
In its ruling Thursday, the European Court of Justice (ECJ) did not comment on whether funds were misused but concluded that "appearances of impartiality were seriously compromised" in the European Parliament panel.
The ECJ acknowledged that the comments made by the lawmaker gave the impression "that member had prejudged the issue" before the decision was made. "The Court points out that the Parliament must provide sufficient guarantees to rule out any doubt over the lack of bias of its members when taking administrative decisions, which means that the members are to abstain from making public statements relating to the proper or improper management of funds by political parties at European level when the files are being examined," the court said.
The European Parliament had blamed ADDE for spending EU funds on financing surveys and opinion polls in the U.K. in the interest of UKIP only ahead of Britain's 2015 general election and the 2016 Brexit referendum in which the country voted to leave the EU.
Under EU rules, funds from the bloc cannot be used to finance referendum campaigns. But the court pointed out that the ADDE also used EU funds for polling in Belgium, France, Hungary, the Netherlands, Poland and Sweden, questioning participants on how they would vote if an EU membership referendum was to be held.
"Only the part of the opinion poll relating to the UK is concerned by the prohibition of the financing of referenda campaigns," the court said. "Therefore, the Court considers that the declaration that all the expenditure relating to the opinion poll was ineligible was not justified."
The ECJ did rule that Parliament was entitled to ask ADDE for a bank guarantee and to limit pre-financing for the party to 33% of the maximum amount of the grant for the 2017 financial year, a decision the political group had also challenged.