Police allowed Union flag protesters to stage illegal marches into Belfast city centre every week for up to three months, the High Court heard today.
Lawyers for a nationalist resident claimed all those involved in the un-notified parades should have been arrested for criminal offences.
The PSNI operation undermined laws put in place to govern public processions in Northern Ireland, a judge was told.
Legal proceedings have been brought over marches from east Belfast staged every Saturday from December until the end of February.
Violence flared on several occasions as participants heading for City Hall to protest at the decision to limit the flying of the Union flag passed the Catholic Short Strand enclave.
An unidentified man who lives in the area is seeking to judicially review both the PSNI and Secretary of State Theresa Villiers.
His legal team want a declaration that the failure of police to stop demonstrators travelling along the route breached parading legislation.
Under the Public Processions (NI) Act 1998, brought in after major disorder across Northern Ireland linked to the Drumcree dispute, notification of marches must be given to the Parades Commission.
The resident also claims his right to privacy was violated by the protests.
The Secretary of State has been drawn into the case due to her alleged failure to exercise powers to prohibit public processions.
Earlier in the proceedings an east Belfast woman who took part in the mass walks into the city centre was refused permission to intervene in the case.
Opening the Short Strand man's challenge, Karen Quinlivan QC said DVD footage shows PSNI Land Rovers at the front of the weekly marches, with more officers at the sides and rear.
She told Mr Justice Treacy that police were "effectively escorting protesters to City Hall".
Her contention was that the operation failed to either prevent an illegal parade or arrest those involved.
"Those people who participated in these parades to Belfast City Hall on those dates were guilty of criminal offences, aside from any associated disorder," she said.
Ms Quinlivan pointed out that responsibility for determinations on marches had passed from police to the Parades Commission.
The barrister claimed the Public Processions Act had been "fundamentally undermined... by the Chief Constable taking upon himself the role of deciding if the parades should take place".
She added: "Effectively police enabled loyalist protesters to reinstate the situation which was in place prior to the establishment of the Parades Commission."
Senior counsel for the PSNI rejected the claim that marchers should have been subsequently arrested and prosecuted.
According to Tony McGleenan QC, it could have resulted in charges being brought against tens of thousands of people who took part in protests across Northern Ireland.
Police were making operational decisions in a highly-charged, contentious situation, he argued.
Mr Justice Treacy was told senior officers took into account resource constraints, political considerations, the wider community and risk to life.
Concerns about paramilitary involvement and the prospect of action that could inflame violence also featured.
"It may appear that you could clear the road of fifteen protestors, but in two hours time you may face a riot involving three hundred or a thousand," Mr McGleenan pointed out.
"Police are clearly alive to the fact that in certain communities closely involved in these protests there have been very sinister elements orchestrating protests."