Mr Stewart and Mr Shephard received £7,000 and £5,000 respectively, but had their applications for a larger payment refused because they were not formally dismissed or discharged.
Last week, Defence Secretary Wes Streeting told The Guardian the MoD was looking to resolve the case with a “way forward that doesn’t require legal action.
But on Wednesday, a judge ruled the two men could take their claim for further compensation to a full hearing, likely to take place in January.
Mrs Justice Eady said: “I am persuaded this is a matter that warrants further consideration by the court.”
Under the current scheme, claimants can receive a flat-rate payment of £50,000 if a veteran was dismissed or administratively discharged in the ban.
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