The court also says jailing the First Nations protesters served only to pit the community against the justice system.
The protesters had spent between 10 and 14 weeks in jail when the court decided in late May to reduce their six-month sentences to time served.
Today, a panel of three judges released its reasons for the decision and ruled that while the case's motion judge was conscientious in trying to resolve the difficult case he handed out sentences that were "too harsh."
The ruling states the judge failed to refer to mitigating factors in the case, including the fact that the protesters were first-time offenders when they launched peace blockades to prevent mining in their communities.
The panel said the Supreme Court of Canada has ruled that judges must take into account all available sanctions other than imprisonment and give particular consideration to the circumstances of aboriginal offenders and the "unique systemic or background factors" that may have spurred their offences.
The judges also ruled the protesters are entitled to their costs of the appeal.
"That the court found it necessary to imprison the (protesters) simply serves to emphasize the gulf between the dominant cultures sense of justice and this First Nations sense of justice," the decision states.
"Imprisonment, far from being a meaningful sanction for the community, had the effect of pitting the community against the justice system."
Six members of the Kitchenuhmaykoosib Inninuwug (KI) First Nation - including its chief and deputy chief - had served almost 10 weeks in jail, while Ardoch Algonquin First Nation's leader Bob Lovelace was in jail for 14 weeks.