Dr Alan Lennon was not appointed to the position and subsequently took a case against the DSD, assisted by the Equality Commission.

The Fair Employment Tribunal has now said it is satisfied that the successful candidate, Sean Hogan, was appointed as chairman of NI Water "because he was not from a Protestant background and because he was known to the Minister and his ministerial colleagues".

Dr Lennon, a Protestant, was interviewed for the post and was deemed appointable by the selection panel, along with three other Protestant candidates and one Roman Catholic candidate.

He made the case that he believed that he had greater relevant experience than the successful candidate and further argued that the then Minister Conor Murphy added new criteria to the essential criteria established at the beginning of the process, in breach of the Public Appointments Commissioner's Code.

The Tribunal was satisfied that three factors were introduced by the Minister as additional essential criteria and that "the provisions of the Code do not, in the Tribunal's view, permit the use of additional criteria".

"I brought this case to shine a light on what I feel is a selection system that is not fit for purpose," Dr Lennon said.

"I am very pleased that it appears that this case will put in train changes and improvements to the processes around public appointments."

However, former DRD minister Conor Murphy says he "absolutely refute any allegation of discrimination against Alan Lennon on religious grounds."

He said:"I stand over all of the appointments I made as the Regional Development Minister and adhered to all the set criteria for such appointments.

"The Department have six weeks to decide whether to appeal this ruling. Having read the ruling myself I would be urging the Department to utilise the appeals process."

Evelyn Collins, Chief Executive of the Equality Commission, added: "The Commission welcomes this important confirmation that public appointments, including those which involve the exercise of a Minister's discretion, are fully and clearly within the protection of the anti-discrimination legislation.

"We supported this case because it is our view that the standards of fairness and non-discrimination that we expect in employment situations should apply equally to all public appointments."

Ulster Unionist Leader, Mike Nesbitt, described the findings as "extremely concerning."

The Strangford MLA said: "Sinn Fein has set themselves up as the Party of equality but their credibility in this area has been totally and utterly shredded."

He added: "There will be increased scrutiny on all Sinn Fein appointments, past, present and future, following the tribunal conclusions."

Alliance Regional Development spokesperson Stewart Dickson says the industrial tribunal decision has raised a lot of questions.

The East Antrim MLA said: "This tribunal decision has raised a lot of questions for both Conor Murphy and the Department for Regional Development as to what happened in this application process."

He added: " I will also be raising this issue with the Assembly Speaker when the Assembly next sits on Monday for I believe there is a role for him to play in looking into the actions of three former Ministers.

"There may even be a case for Mr Murphy to appear before the Assembly Regional Development Committee."

The tribunal will reconvene at a later date to decide on the nature and amount of compensation.