The Supreme Court of Canada has quashed the Yukon government's decision to dramatically weaken a plan to preserve a vast wilderness area in the Peel Watershed, handing a victory to First Nations communities in the territory.

In a unanimous decision Friday, the top court overturned a Court of Appeal ruling that gave the territorial government the right to completely revisit the process undertaken by the Yukon Land Use Planning Council, a joint body set up under a modern treaty with four First Nations.

Prior to the court's decision, Premier Sandy Silver – who was elected a year ago – promised to respect the recommendations of the land-use council to preserve 55 per cent of the wilderness area permanently and impose a temporary ban on development in another 25 per cent of the area.

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"We have said we support the final recommendation and now we have the clarity to proceed on that basis," he said in an interview Friday.

"This means a lot for reconciliation and it means a lot for the sophistication of [Indigenous] self-government. But it also speaks to the clarity of where mining can and cannot happen, and that's an important piece of the puzzle."

At 68,000 square kilometres, the Peel Watershed is one of the largest intact wilderness areas in North America, an unspoiled home to grizzly bears, caribou and wolves.

The former territorial government wanted to open 70 per cent of the watershed to development.

"Protection of the land is important to us," Tr'ondek Hwech'in First Nation Chief Roberta Joseph said in an interview. "We get food and medicine from the land. We go out and have spiritual and holistic relationship with the land. It means our strength and our identity.… It's really hard for others to understand how important that is."

Even with the new government's commitment, First Nations leaders said it was critical that the top court make it clear that governments must follow the procedures laid out under treaties.

"Indeed, a modern treaty will not accomplish its purpose of fostering positive, long-term relationships between Indigenous peoples and the Crown if it is interpreted in an ungenerous manner or as if it were an everyday commercial contract," Justice Andromache Karakatsanis said in her reasons.

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The government conceded at the trial stage that it had failed to respect its treaty obligations and wanted what the First Nations and environmental groups described as a "do over" of the entire process to reach its desired conclusion.

The dispute arose after First Nations and the government set up the land-use commission in 2004 to govern the Peel Watershed, as required by treaty. After several years of consultations, the commission recommended that 55 per cent be permanently protected and another 25 per cent have interim protection.

After receiving a final recommendation, the government said it was "modifying" the recommendation – as permitted under the process. However, its proposal amounted to a wholesale reversal, ruling instead that 70 per cent of the watershed would be open to development.

"By proceeding in this manner, Yukon 'usurped the planning process and the role of the commission,' " Justice Karakatsanis said, quoting the trial judge.

Mining and oil companies were watching the top court's decision, which will affect not only the Peel case but several other land-use planning processes under way in the territory.

"We're mainly concerned with the trajectory of land withdrawals in Yukon," said Samson Hartland, executive director of the Yukon Chamber of Mines. The Peel Watershed is considered to be a treasure trove of minerals, including a large iron ore deposit with leases owned by Chevron Canada Ltd.

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Chevron spokesman Ray Lord said the company is reviewing the court decision. "We do recognize the ecological and cultural significance of the Peel Watershed," Mr. Lord said in an e-mail, "and believe that development can happen in a responsible manner that preserves ecological, cultural and social values while benefiting the communities where we operate."

Environmental groups say industry has pressured the government to open pristine wilderness with access roads and other exploration activity that will threaten endangered species and mar the landscape. Mining and oil and gas extraction "cannot be assumed to be the first and best use of the land," said Christina Macdonald, executive director of the Yukon Conservation Society.