NI Secretary Peter Hain has said he is "extremely disappointed" by a decision to overturn the appointment of two Orangemen to the Parades Commission.
Don MacKay (left) and David Burrows are prominent Orangemen
The High Court ruled the appointments of David Burrows and fellow Orangeman Don McKay, who resigned from the body this week, were unlawful.
It said the appointments did not ensure membership of the body represented both sides of the community.
Mr Hain said he would take legal advice over the judgement.
"The appointments to the Parades Commission were made in good faith and the new commission has been very successful at beginning to build trust and confidence," Mr Hain added.
However, delivering his ruling, Mr Justice Morgan said he found the failure of the appointment panel members to recognise a potential conflict of interest "inexplicable".
He also said the case caused him to doubt whether the appointment panel members understood the nature of the task in which they were engaged.
The judge said there was no reason why Mr Burrows could not apply again.
He added: "I wish to make it clear that this judgement should not operate as any prohibition on the reappointment of Mr Burrows should the secretary of state so decide."
In response, a spokesperson for the Parades Commission said: "As stated repeatedly over recent weeks and months, the issue of appointments is entirely a matter for the Northern Ireland Office.
"It is deeply frustrating that the real and significant progress we are making in sensitive locations right across Northern Ireland is being delayed by events over which the commission has no control."
Joe Duffy, a resident of the nationalist Garvaghy Road in Portadown, went to the High Court last week seeking to overturn the appointment of Mr Burrows and Mr MacKay.
Garvaghy Road Residents Association spokesman Brendan MacCionnaith said on Friday that the case raised questions about the judgement of Parades Commission chairman Roger Poole.
Mr MacCionnaith said there was a conflict of interest in having any member of the Orange Order or any member of a residents' group opposed to Orange parades on the commission.
He said they would meet over the weekend to consider their formal response and whether to take further action.
DUP assembly member and Independent Orange Order Grand Master George Dawson also called into question the judgement of the commission's chairman Mr Poole.
"Mr Poole backed their appointment and is on record praising the role they have played in the commission," he said.
Both Mr Burrows and Mr MacKay were members of the Portadown Lodge of the Orange Order which has been at the centre of the decade-long dispute surrounding what has become known as the Drumcree parade.
Mr MacKay resigned from the commission earlier this week after it emerged he had listed DUP MP David Simpson and SDLP assembly member Dolores Kelly as referees on his application form without asking their permission.
SDLP Upper Bann assembly member Ms Kelly said the ruling confirmed that the appointments procedure used had failed to provide membership representative of the community.
"This whole debacle has been the NIO's fault and the ruling shows they acted unlawfully," she said.
Ulster Unionist assembly member Michael Copeland said the appointment of Mr Burrows and Mr MacKay had "redressed the apparent imbalance in the previous membership".
"These latest revelations may be the final nails in the coffin of the Parades Commission, although it must be pointed out that the failings in the appointments process cannot be laid at the door of Mr Burrows, Mr McKay nor indeed the Parades Commission itself.
"The responsibility for this shambles properly resides within the Northern Ireland Office and the ultimate responsibility must indeed rest with the secretary of state," he said.
The Parades Commission was set up in by the government in 1997 to make decisions on whether controversial parades should be restricted.