The Supreme Court reversed a lower court ruling that ordered SsangYong Motor workers who staged a violent strike more than a decade ago to compensate the government.
In its decision on Wednesday, the top court said the excessive force used by police to break up the strike may have been illegal and the damage inflicted on a police helicopter and other assets in the process would therefore constitute self-defense.
The court added that the SsangYong union should not have been ordered to cover 80 percent of expenses to repair a crane damaged during the protest.
Unionized SsangYong workers launched a strike in May of 2009 in protest against management's restructuring plan and seized the assembly plant in the city of Pyeongtaek for over two months before the police forcibly broke it up.
Lower courts had partially ruled in favor of the state, with the appellate court ordering the union to pay one-point-one billion won in compensation.
The case has been remanded to the Seoul High Court for a review.