Answering my own question, the selection panel wasn't a 3-person NEC Panel, but a 5-person West Midlands regional panel led by Fiona Gordon and Mike Penn. The Industrial Tribunal findings, as reported in the Court of Appeal judgement, are well worth a read: 

A membership check revealed no irregularity. But the NEC decided in November 1997 that the selection or re-selection of candidates would be conducted by an outside panel under the direction of the West Midlands regional secretary, Fiona Gordon, and the National Constitutional Officer, Mike Penn. These two, with three others, constituted the panel which in December 1997 interviewed but declined to select Mr Ahsan as one of the eight ward candidates. Using a scoring system, they rated him below the successful eight . two of Pakistani origin, one of African Asian origin, one of Afro-Caribbean origin and three white candidates. Of the latter, one was Ian Jamieson, who was selected for the Sparkhill ward which Mr Ahsan had for some years represented. Mr Jamieson was a member of another branch, but in breach of the party's rules . as the tribunal found . he failed to verify his membership from a date which would have demonstrated that he had the requisite twelve months' membership of the party.

The tribunal went with great care into the selection procedure. It is sufficient for present purposes to say that they were seriously handicapped by the unexplained destruction of all the panel's notes; that they drew adverse inferences from this and from the tardiness and evasiveness of the party's answer to Mr Ahsan's pre-action questionnaire; that they found the selection procedure "haphazard in the extreme"; that they found the continued suspension of only the wards with high Pakistani populations to have "a racial dimension"; and that different rules were applied to the successful candidate, Mr Jamieson, because . in Mr Penn's own words . "he.was best placed to counter some of the problems which had arisen in the ward", a clear reference, in the tribunal's judgment, to the adverse publicity surrounding the housing grants and the membership allegations.

...It was perfectly plain to us on the evidence we heard that the respondent wanted the applicant off the council. ...  this applicant's ethnic origins had a significant influence on the outcome of the selection procedure

Hmm, a selection panel that was "haphazard in the extreme" eh. NB the subsequent Law Lords appeal noted "the Party's fail[ed] to preserve vital documents, despite having been told within two days that there would be a challenge to the procedure." and "The candidate selected by the Panel, Mr Ian Jamieson, did not qualify under the [party] rules, which required candidates to have been verified party members for 12 months." which cannot reflect well on the panel and the party. Hmmmm.

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