Lord Justice Kennedy and Mrs Justice Hallett quashed the 59-year-old's conviction by a Norfolk district judge for disorderly behaviour "likely to cause harassment, alarm and distress" to US servicemen by scrawling "Stop Star Wars" across their national flag.

They invoked article 10 of the European convention on human rights to overrule the court decision in May at Thetford, near the US air force base at RAF Feltwell, where Ms Percy used the flag last December in one of her protests which go back 20 years.

She had been fined £300 and ordered to pay legal costs after admitting that she had unrolled the flag outside the base and stood on it, blocking the path of a military vehicle.

The high court decision did not overturn an obstruction conviction against the campaigner, who has served jail terms but won legal battles over footpaths closed by RAF and US personnel.

Mrs Justice Hallett said that the conviction for disorderly behaviour had been incompatible with Ms Percy's right to protest peacefully on an issue about which she held very strong feelings. With Lord Justice Kennedy concurring, she said: "The lower court appears to have placed too much reliance on just one factor - namely that the appellant's insulting behaviour could have been avoided.

"This seems to me to give insufficient weight to the presumption in the appellant's favour of the right to freedom of expression." The judge added that Ms Percy was motivated by deeply held beliefs that the American "star wars" project was misguided and posed a danger to international stability and was not in the best interests of the UK.

Keir Starmer, counsel for Ms Percy, told the court: "Flag denigration is a form of protest activity renowned the world over and has been afforded protection in other jurisdictions, for example in the US itself. To find it necessary to protect American sensitivities from this failed to address the issue of what was essential to protect the rights of peaceful protest in a free and democratic society."

The decision adds to growing human rights case law in Britain, but is likely to face further challenges because of the competing rights of individuals affected by protest. The district judge had found against Ms Percy because of "a pressing social need in a multicultural society to prevent the denigration of objects of veneration".

Mrs Justice Hallett found this too far-fetched in the Feltwell case and added that the verdict had been "disproportionate and made in error".

Lindis Percy, a health visitor and midwife aged 59, won an order yesterday quashing her conviction at Thetford magistrates' court in Norfolk, over an incident at RAF Feltwell in December last year.

Lord Justice Kennedy and Mrs Justice Hallett ruled that the conviction was "incompatible" with her right to free expression under Article 10 of the European Convention on Human Rights. Her lawyers had argued that American servicemen had no right to have their flag legally protected from disrespectful treatment.

In May, Ms Percy was fined £200 for disorderly behaviour after Thetford magistrates were told she had defaced the flag by putting a stripe across the stars and writing "Stop Star Wars" across the stripes. She had used the flag in a protest against British and American defence policy, placing it on the ground in front of a vehicle and standing on it.

Five American service personnel at the RAF Feltwell gate gave evidence that they were offended by Ms Percy's behaviour, regarding her acts as "a desecration of their national flag to which they attach considerable importance".

But Keir Starmer, appearing for Ms Percy, had argued that "flag denigration" was a "form of protest activity renowned the world over and has been afforded protection in other jurisdictions, for example in the USA itself".

Ms Percy had the right to freedom of expression until it could be established that it was "necessary and proportionate" to restrict it, he said.

Mrs Justice Hallet said the magistrates' court that had convicted her had accepted Ms Percy was motivated by deeply held beliefs that the "Star Wars" project was misguided, posed a danger to international stability and was not in the best interests of Britain. The case turned on the impact of Article 10 of the human rights convention, which protected freedom of expression.

Quashing Ms Percy's conviction, Mrs Justice Hallett said the district judge "appears to have placed too much reliance on just one factor - namely that the appellant's insulting behaviour could have been avoided ... This seems to me to give insufficient weight to the presumption in the appellant's favour of the right to freedom of expression."

On 20 December 2001 Lindis Percy was arrested by Sergeant Rogers of the Ministry of Defence Police at USAF Lakenheath after protesting peacefully holding the US flag with 'NOT IN MY NAME' written on it.  She had been waived in while driving her car past a security check point by Ministry of Defence Police and US security personnel in daylight.

A US security personnel made a complaint to Sergeant Rogers that she was 'harrassed and distressed' by the use of the US flag and also that the flag had been written on.  Ms Percy was arrested under section 5 of the Public Order Act 1986.  She was detained at Mildenhall Police Station for nearly 6 hours and 'reported with a view to prosecution' by Sergeant Rogers.