The Qatar Football Association (QFA) filed a lawsuit over the comment claiming it showed collective disrespect and Zwanziger should be banned from repeating it.
But Dusseldorf's regional court ruled that while the comment was indeed offensive, Zwanziger was not obliged under German law to change his wording or be blocked from repeating it.
"Those criticising public abuses do not have to use the mildest possible medium to highlight their points of view," the court said in a statement.
"It has nothing to do with public defamation of the Qatar Football Association, as it was about the legality and checks regarding the awarding of the 2022 World Cup to Qatar that were at the forefront.
"With respect to the sporting, financial and political importance of a football World Cup host, the purpose for the comment, which was about drawing attention to the critical working process and decision of FIFA, is set higher than the honour of the Qatar Football Association."
Zwanziger has said he was not referring to the Qatari people with his comment.
FIFA, where Zwanziger was an Executive Committee member, faced the biggest crisis in its history last year with several investigations leading to dozens of individuals being arrested on corruption charges.
Switzerland's prosecutor is investigating both FIFA's decision to award the 2018 World Cup to Russia and the 2022 tournament to Qatar, a small, wealthy desert country with no real football tradition.
Several human rights groups have also accused Qatar of systematically abusing migrant workers rights.
Russia and Qatar have denied all wrong doing.
A Frankfurt prosecutor is also formally investigating Zwanziger and other former football officials for suspected tax fraud in relation to a payment to FIFA ahead of to the 2006 World Cup in Germany.
(Reporting by Karolos Grohmann. Editing by Patrick Johnston)
