Children's rights charity Just for Kids Law brought the case against the Home Office, saying that it breached young people's human rights and they were not given the necessary safeguards to protect them from harm.
However, Mr Justice Supperstone dismissed the case, concluding that he was satisfied the practice is lawful.
The judge did acknowledge that children are "inherently more vulnerable than adults" and that the "very significant risk of physical and psychological harm" to them being covert human intelligence sources in the context of serious crimes is "self-evident".
Despite this, he rejected Just for Kids Law's assertion that safeguarding provided for 16- and 17-year-olds in such circumstances was inadequate.
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