Lady Justice Hallet said the "on-the-run" letters sent by the Tony Blair administration to suspects following the 1997 Good Friday Agreement was unprecedented, but not unlawful in principle.
Prime Minister David Cameron ordered the review into the process after the case against John Downey, one of those who received a letter, collapsed at the Old Bailey last year. Mr Downey, of County Donegal, walked free after being charged with murdering four soldiers.
The Hallet report, published yesterday, has concluded it was not the fact that Mr Downey received the letter that was the problem, but that the document contained an incorrect and misleading statement. She said it was due to a catastrophic mistake by Northern Irish police.
She found 13 "on-the-runs" received the royal prerogative of mercy between 2000 and 2002. She had identified two other cases where similar errors were apparently made. Had the scheme been properly administered, Mr Downey would not have received it, Justice Hallet said.
Acknowledging that a catastrophic error had been made in the Downey case, she insisted the letters of assurance did not amount to amnesties.
The senior judge said that, while the scheme was not well publicised, and effectively kept "below the radar", it was not secret. She added: "The administrative scheme did not amount to an amnesty. Suspected terrorists were not handed a 'get out of jail free card'."
The findings angered the brother of Lieutenant Anthony Daly, who died in the Hyde Park bombing.
Chris Daly said: "If the process had been properly followed, or even if there was a proper process to follow, and people were aware of what they were actually doing, then Downey would never have got his letter and we wouldn't be speaking here right now.
"A catastrophic mistake was made, and that mistake can't be undone." Northern Ireland Secretary Theresa Villiers told MPs the scheme had not been properly designed. She said: "It evolved. As a result there was no overall policy or responsibility or accountability for it. The scheme lacked proper lines of accountability and safeguards. When errors came to light opportunities were missed to rectify them, there was no risk assessment.
"There are many lessons to be learned from this episode, not least the crucial importance of continued efforts to find an agreement on the divisive issues of flags, parading and the past."
However, she said the report found no evidence ministers or officials sought to interfere in the machinery of justice or to obscure the scheme from the public.
She said there needed to be a process that was transparent, accountable and balanced to end the era of side deals after Good Friday. She added that a "stay" in the prosecution against Mr Downey was unlikely to be lifted .
Northern Ireland First Minister Peter Robinson, who had previously threatened to resign over the issue, said side deals had been taking place with dissidents, and added that the process was wrong and shambolic.