The Government has lost the latest round of a legal battle over its back-to-work schemes.
Three Court of Appeal judges in London have dismissed its challenge against an earlier High Court ruling.
The Government had appealed in a bid to prevent thousands of individuals who had jobseeker payments stopped from clawing back millions of pounds in lost benefits.
Friday's decision is the latest in litigation over back-to-work schemes following a Supreme Court ruling in October 2013.
Five justices at the highest court in the land ruled, in what became known as the Poundland case, that the Government's flagship back-to-work schemes were flawed because sufficient information had not been given to claimants to enable them to make representations before benefits were stopped.
The Government brought in emergency retrospective legislation, the Jobseekers (Back to Work Schemes) Act 2013, to "protect the public purse" and stop the payouts.
It was argued the sanctions had been justified and the claimants would be receiving "undeserved windfall payments".
But a High Court judge, Mrs Justice Lang, declared the 2013 Act "incompatible" with Article 6 of the European Convention on Human Rights, which protects the right to fair hearings...
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It seems to me that the grounds for taking this matter to appeal were not reasonable, therefore the delay in the payments introduced by this appeal were not reasonable so that is another breach of Article Six...