The lump-sum payments, awarded last week by Judge Francois Lemieux, are the last chapter in a drawn-out court battle Chretien and Jean Pelletier waged against Justice John Gomery and the report he wrote on the scandal in 2005.
Pelletier died in 2009 due to complications from colon cancer, but his estate continued to pursue the case in court.
Prime Minister Stephen Harper's parliamentary secretary said the decision was disappointing, and that most Canadians would find the award "distasteful." The Conservatives have long called on the Liberal party to pay back $43 million in missing taxpayer funds.
"That's stolen money that should have been repaid, and certainly it's our position that Jean Chretien should repay that $200,000 to Canadians," said Dean Del Mastro.
"It's stolen money, and I don't think Canadians have forgotten about it."
Chretien and Pelletier had challenged Gomery's conclusion that the former prime minister and his top aide bore some responsibility for the system of illegal kickbacks that sprouted from the sponsorship program. Gomery never said Chretien and Pelletier knew about the wrongdoing, but said safeguards could have been put in place to prevent it.
Gomery, however, made comments to the media about the inquiry, calling it a "spectacle" and predicting there would be "juicy" evidence to come. He also commented that signature-embossed golf balls Chretien had given out in his hometown were "small-town cheap."
In 2008, Chretien and Pelletier won their bid in Federal Court to have the findings about him in the report struck down, on the basis that Gomery had betrayed a bias against him.
"The nature of the comments made to the media are such that no reasonable person looking realistically and practically at the issue, and thinking the matter through, could possibly conclude that the commissioner would decide the issues fairly," Federal Court Judge Max Teitelbaum said at the time.
The federal government appealed that decision to the Federal Court of Appeal and lost in 2010. In February 2011, Chretien was awarded $25,000 in compensation for legal costs associated with fighting the federal appeal, although he had asked for $70,000.
This next $200,000 is associated with the original Federal Court judicial review. Chretien had asked for $300,000, detailing the nearly $400,000 he had spent on lawyers' fees over the years.
The Attorney General of Canada argued it should only be $36,205, pointing to federal guidelines for compensating parties for legal expenses.
But Lemieux used his discretion, echoing the view of a Federal Court of Appeal justice who said the case was one of public importance involving the reputation of a former prime minister.
A source close to Chretien said he would not be commenting on the award ruling.
In Pelletier's case, the government had already awarded him $101,125 to cover some of his legal costs associated with the initial judicial review. He got nothing for money spent fighting the government's appeal because his estate had taken too long to file a claim with the Federal Court of Appeal.
But Pelletier's estate said he had spent $478,496 in lawyer's fees fighting the judicial review, and like Chretien sought a $300,000 compromise. The Attorney General argued Pelletier should get $11,282.
The judge also decided to award Pelletier's estate $200,000.
"I appreciate Mr. Pelletier was not a former prime minister. He was however a very well-known public figure whose reputation was tarnished by the Commission of Inquiry," Lemieux wrote.
"He, like Mr. Chretien, fought to reverse the damage caused to his reputation. He had to incur substantial legal costs to obtain vindication. He should be partly compensated for it."
Also on HuffPost