The United Nations High Commission for Refugees (UNHCR) has warned the Federal Government may be breaching international law by refusing to process asylum seekers currently detained on Christmas Island.

The Government says it will not process the applications of about 400 asylum seekers, as it searches for a third country to send them for processing.

UNHCR regional representative Rick Towle says that amounts to arbitrary and unlawful detention under international law.

But Immigration Minister Chris Bowen insists the Government is within its rights to handle the matter in the manner it has.

Under Australia's proposed refugee swap deal with Malaysia, 800 newly arrived asylum seekers would be sent to that country for processing.

In return, Australia will resettle 4,000 registered refugees from Malaysia over the next four years.

Refugee advocates have already launched two High Court challenges to the Government's right to detain people without determining their refugee status.