The High Court has decided, for the first time, the approach that should be taken to resolving native title compensation claims. In a previous article, we said it would be “the most significant case concerning Indigenous land rights since the Mabo and Wik decisions”.

Read more: How will Indigenous people be compensated for lost native title rights? The High Court will soon decide

The High Court’s decision yesterday certainly stands up to that description, and provides a degree of certainty for native title holders and governments. However, it also leaves a number of important issues unresolved. There will no doubt be further significant decisions in the future.

The significance of the decision

The decision is significant for Indigenous people because it confirms the substantial awards that may be made for past losses of native title. In this case, the High Court awarded the Ngaliwurru and Nungali peoples just over A$2.5 million for the loss of 1.27 square kilometres of non-exclusive native title, in and around the remote Northern Territory township of Timber Creek. The loss of that title occurred incrementally, by various acts of the NT government in the 1980s and ’90s.

The decision is significant for state and territory governments because the financial liabilities they owe to many Indigenous peoples have been clarified. Governments have known about the potential for compensation claims since the Native Title Act was passed in 1993. But because the Act expresses the right to compensation in vague terms (being an entitlement “on just terms to compensate the native title holders”), the amounts were unquantifiable. For example, the Commonwealth government’s 2007-08 budget papers noted:

The Australian Government’s liability cannot be quantified due to uncertainty about the number and effect of compensable acts, both in the past and in the future, and the value of native title affected by those acts.

The Native Title Act’s recognition of rights to compensation extends back only to losses of title that have occurred since October 31 1975 (when the Racial Discrimination Act 1975 commenced). However, as explained below, it is possible that claims for compensation for some losses of title prior to that date could succeed.

What the High Court said

Unlike conventional interests in land – like freehold title – it is not possible to sell or lease native title rights. That made it especially difficult to determine what the economic value of those rights would be.

Secondly, there was the question of how a native title party’s cultural or religious ties to country would be compensated for. The High Court’s decision has provided the first inkling of clarity on these questions.

The High Court said the economic component of native title rights was to be valued by assessing those rights in comparison to a freehold title. A freehold title sets the upper limit for economic value because it provides the most extensive set of property rights known to the law. The court confirmed that the task is essentially intuitive.

The first decision of the Federal Court, in 2016, had said that the rights in this case were worth 80% of the freehold value of the land. The Full Court of the Federal Court reduced that amount to 65%. The High Court whittled it down further in this decision, to 50%.

As to the cultural or religious loss caused by the loss of native title rights, the High Court said:

… what, in the end, is required is a monetary figure arrived at as the result of a social judgment, made by the trial judge and monitored by appellate courts, of what, in the Australian community, at this time, is an appropriate award for what has been done; what is appropriate, fair or just.

The court considered that the amount awarded by the courts below – A$1.3 million – was an appropriate award for this aspect of the loss.

Why we can expect more judgments on this topic

The court’s judgment still leaves a lot intuitive work to be done by those trying to determine native title compensation awards. In our view, that is not to the benefit of either native title parties or governments.

What is needed is further guidance about the criteria or principles that will guide the exercise of what is, essentially, an evaluative, or intuitive, decision. Further clarity about these principles will make it easier for compensation claims to be resolved by agreement, rather than by expensive (and time-consuming) litigation. Because the common law is worked out incrementally by the courts, it is likely that future decisions will go some way towards providing further guidance.

Read more: FactCheck: can native title 'only exist if Australia was settled, not invaded'?

The High Court’s decision also leaves unanswered a number of significant questions. The most significant of these concerns the requirement in the Australian Constitution, section 51, that certain acquisitions of property be on “just terms”.

High Court judges have, over the years, expressed different views as to whether native title would enjoy the protection of this provision. If it does, then it is possible that certain restrictions on compensation provided for under the Native Title Act are unconstitutional.

Further, it may be possible for compensation claims to be successfully made outside of the Native Title Act and for losses that occurred before October 31 1975. If that were the case, for example, actions by the Commonwealth in the Northern Territory (which achieved self-government only in 1978) that extinguished or affected native title, all the way back to Federation in 1901, could be compensable.

What the decision means

For governments around the country that are beginning to quantify their native title liabilities, the amounts could be eye-wateringly large. It is unlikely that many governments have prepared financially for the wave of potential compensation claims.

The greater certainty about the amounts that may be available is likely to accelerate the making of such claims. As the Federal Court noted in its 2016-17 annual report:

A significant number of compensation claims are anticipated when the legal processes in Griffiths [the formal name of this High Court decision] conclude.

Overall, the decision will mark a shift in Australia’s native title journey from determining claims about the existence of native title (phase one) into determining compensation for past losses of native title (phase two).

The first phase has been with us since Mabo in 1992, and new claims for the recognition of native title continue to be made. The second phase is only just beginning. We will see claims before the courts for many years to come.

Given that compensation claims will be payable in most cases by governments, it is likely the decision will trigger political debate about the economic, budgetary and social implications. This debate will deserve close scrutiny.