The high court has ordered the Northern Territory government to pay $2.53m in compensation to a group of native title holders, in a landmark ruling establishing a significant precedent for future compensation claims.

It is the first time the high court has considered the monetary value of native title and associated compensation for the removal of land rights. The case is considered one of the most significant land rights cases since the Mabo ruling, and could pave the way for billions of dollars in liability payouts by Australian governments.

The judgment, delivered on Wednesday, reduced a 2016 federal court ruling awarding $3.3m in compensation for 53 acts by the NT government between 1980 and 1996, which included construction of public works and the granting of tenure, and which were later found to have “impaired or extinguished” native title rights and interests.

The payment to claimants acting for the Ngaliwurru and Nungali people from Timber Creek, incorporated $320,250 in compensation for economic loss and associated interest of $910,100, and maintained the original awarding of $1.3m compensation for cultural loss.

The court ruled that $1.3m “was not manifestly excessive and was not inconsistent with acceptable community standards”.

It said assessments of cultural loss would vary between cases, depending on the relationship of the native title holders to their land, the nature of the compensable act and its effect on the connection.

Both the NT government and the commonwealth had argued $1.3m was excessive.

The interim chief executive of the Northern Land Council, Jak Ah Kit, welcomed the judgment as setting “the rules”. It meant that future claims could be negotiated “without the expense and delay of litigation”, he said.

Ah Kit said the reduced amount of compensation was still reasonable.

“What is important is that the component of $1.3m for cultural loss was upheld by all high court and federal court judges”, Ah Kit said.

“This important finding means that the spiritual connection of Aboriginal people to their country is paramount in Australian law – as it should be.”

The high court heard the case in Darwin in September. It was the first time in the court’s 118-year history it had sat in Darwin, and the hearing was attended by a large contingent of traditional owners.

Timber Creek covers about 2,360 hectares, halfway between Katherine and Kununurra. About two-thirds of the population of 230 people are Aboriginal, and principally native title holders.

The 127 hectares affected by the compensation claim made up just 6% of the native title area.

The original ruling had awarded the claimants compensation for economic loss to the tune of 80% of the freehold value of the land. It was appealed to the full bench of the federal court, before coming before the High Court. In this appeal the claimants sought to increase that to 100%, while the NT government was appealing for 50%.

On Wednesday the high court determined the economic loss was worth 50% of the freehold value, but otherwise affirmed the original trial judge’s decision that the group was entitled to interest on that payment, as well as the $1.3m for cultural loss.

Tony Denholder, a partner at Ashurst law firm, said the decision had huge implications for other claims.

“That the small area of Timber Creek still triggered a compensation liability of over $2.5m, will have strong implications for the more than 2.8m sq km of native title land holdings across the rest of Australia,” he said.

“The high court’s decision will likely to trigger compensation applications from many of the hundreds of native title holder groups around Australia, who finally have clarity – albeit limited – on how they might quantify the compensation owed to them for impacts on their native title.”

The ruling is also expected to affect the mining, resources and pastoral sectors, with questions around whether governments could pass liability costs onto third parties in future cases.

The chief executive of the Minerals Council of Australia, Tania Constable, said the industry was still reviewing the implications of the ruling but urged governments to “provide policy certainty to promote investment, jobs and sustainable regional communities”.

The NT government argued that no monetary value could be put on the cultural loss and that previous judges had been wrong to rely on the effect of one act to determine the collateral detrimental effect of others.

The commonwealth said the court made errors in assessing the compensation amount, including not questioning whether the sum was a “wholly erroneous estimate”, and had breached the rules of natural justice in regarding a 2002 discussion paper on calculating native title compensation.

The commonwealth also argued the previous judges had erred in including the effects of the compensable acts on future descendants, and in including a component for “a sense of failed responsibility for the obligation under traditional laws and customs to have cared for and looked after the land”.