Alan Lennon, a Protestant, applied for the position of chairman at the company but did not get the job, despite being deemed appointable by the selection panel.

He subsequently took a case against the Department of Regional Development, assisted by the Equality Commission.

The Fair Employment Tribunal 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".

Speaking after winning the case, Mr Lennon told UTV: "There's not celebration, more relief.

"This process has been dragging on for 18 months since I applied for the post and 12 months since I began to express concern, so a sense of relief.

"There's also a real sense of gratitude to firstly the tribunal, who I thought conducted the case very thoroughly, and also to the Equality Commission.

"There is some hope on my part that this case will actually lead to change in both the DRD and the whole Northern Ireland Civil Service operation, because what I discovered during the course of this case was really very concerning about DRD's approach to appointments."

Dr Lennon had been deemed appointable for the position alongside three more 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 DRD minister, Sinn Féin's 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".

It was also satisfied that there were credibility issues relating to the evidence of the minister and the successful candidate.

Dr Lennon continued: "The professional panel's judgement of who was the best candidate for the job got put in the bin and a shortlist of five names, unmarked with a tiny little summary of background, went forward to the minister.

"In the view of the tribunal it was this process of handing forward unranked lists to the minister that really facilitated the appointment of Mr Hogan.

"It leaves open the possibility of cronyism and I think the tribunal really found in this case that they could not confirm the appointment of Mr Hogan on a basis of a process of merit."

Evelyn Collins of the Equality Commission said it welcomes the outcome.

"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," she said.

"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."

Meanwhile Mr Murphy says he "absolutely refute any allegation of discrimination against Alan Lennon on religious grounds."

He continued:"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."