The court in Strasbourg ruled on Tuesday that Spain must pay €23,000 (nearly £20,000) in compensation to Otegi for breaching his right to freedom of expression after he accused the Spanish monarch of protecting police torturers.
Otegi made his comments after police raided and closed down the Basque-language Egunkaria newspaper in February 2003. The editor, Martxelo Otamendi, and other executives, claimed they were tortured. When Juan Carlos visited the Basque country soon afterwards, Otegi said that as "supreme head of the civil guard police force", the monarch was effectively in command of those who had tortured Egunkaria staff.
Otegi claimed the king "protects torture and imposes his monarchical regime on our people through torture and violence". Three years later a Spanish court found him guilty of insulting the king, handing down a one-year suspended jail sentence and imposing costs.
But the Strasbourg court has decided Otegi was within his rights as a politician to air his grievances against the king, though the torture allegations were never proved.
Otegi's remarks were "made in his capacity as elected member of and spokesperson for a parliamentary group …in the context of the recent closure of the Egunkaria newspaper and the complaint alleging ill-treatment", the Strasbourg judges ruled.
They accepted that his words "could be understood as contributing to a wider public debate on the possible responsibility of the state security forces in cases of ill treatment".
Spanish judges last year threw out a case alleging that Otamendi and other Egunkaria executives had collaborated with Eta. The decision came too late to save Egunkaria.
Four civil guard police officers were found guilty last December of torturing members of an Eta unit that killed two people with a bomb at Madrid's Barajas airport in 2006.
Otegi is one of a group of separatist leaders now trying to persuade Eta to end four decades of terrorism.