Two protesters had challenged the restraint used against them at the Camp for Climate Action in Bishopsgate on April 1, 2009.
Officers in video footage taken on the day were seen to strike demonstrators during a peaceful protest.
Jenny Jones, Green member of the Metropolitan Police Authority, and candidate for London Mayor in 2012, said: “This decision means that the Met will have to reconsider all use of the kettling tactic for demonstrations.
“It’s my view that they have used kettling illegally, and sometimes violently, on peaceful demonstrations since May 2001.
“Kettling takes away the human rights and civil liberties of innocent, legal protesters, which the court has finally recognised.”
The Metropolitan Police said it would appeal against the court’s judgement.