A High Court decision on asylum seekers is threatening to undermine the Federal Government's offshore processing system.

In a judgment handed down today, the court upheld a challenge mounted by two Sri Lankan Tamil asylum seekers who had their refugee claims rejected.

The men wanted to challenge that decision in the courts but were prevented from doing so because they were being held in an offshore detention centre on Christmas Island.

However, in a unanimous decision, the High Court has ruled that was an error of law and that the two men were denied procedural fairness when Government contractors reviewed their case.

The decision calls the entire Commonwealth system of offshore processing for asylum seekers into question, with Opposition immigration spokesman Scott Morrison saying the process has been "thrown into chaos".

The court found the Federal Government cannot deny access to the nation's court system to those asylum seekers who arrive by boat onto an area excised from Australia's migration zone.

Not only is this a win for the two Sri Lankans, but it could apply to any asylum seekers denied access to the courts all the way back to when the Migration Act was changed by the Howard Government almost a decade ago.

The Howard government introduced legislation, supported by Labor, to excise thousands of islands from Australia's migration zone.

The express aim was to deny all asylum seekers arriving by boat access to Australia's court system when it came to reviewing rejected refugee claims.

But the High Court has ruled that because the Immigration Minister decides to apply the Migration Act to every asylum seeker's application for protection or refugee status, asylum seekers should also be afforded procedural fairness in the review of the assessment of their claims.

In other words, asylum seekers from Christmas Island should not be treated differently under Australian law when it comes to applying for protection.

The men, both alleged supporters of the paramilitary Tamil Tigers, arrived on Christmas Island last October claiming they would be persecuted if sent back to Sri Lanka.

The High Court has ordered the Commonwealth and Immigration Minister Chris Bowen to pay costs.

A 'great decision'

The coordinator of the Refugee and Immigration Legal Centre, David Manne, initiated the action on behalf of the two Sri Lankan Tamils.

Their asylum claims have been rejected and could be revisited by the Independent Merits Review, but not reviewed in the courts.

Mr Manne says they had a big win today.

"The attempt to keep these people outside Australian law and the protection of Australian courts has failed. This is a great decision for the rule of law in this country," he said.

"The High Court has unanimously ruled that these decisions for our clients were unfair and unlawful because the Government was not applying ordinary Australian laws to decisions on these life-or-death matters.

"So we call on the Government to publicly confirm that it will respect the court's decision and give all these people a new decision-making process that complies with the ruling of the court.

"That is, decisions must be made fairly and in compliance with ordinary Australian law."

Mr Manne says asylum seekers who have their refugee claims rejected will now have access to the Australian court system.

"The decision applies to every asylum seeker in Australia subject to the offshore processing regime," he said.

"It means that not a single one of them should be removed without their consent until they have had their claims assessed through a new and lawful process in accordance with the High Court's ruling.

"Essentially the solution now is to ensure that all asylum seekers are put on equal footing and no-one is discriminated against because of where or how they arrived in Australia."

Mr Manne says the decision will also apply retrospectively to asylum seekers who have been the subject of offshore processing since 2002.

"There's no doubt that this decision will also result in looking very carefully at what has happened in relation to the decisions of many asylum seekers subject to this offshore processing regime; this scheme which the High Court has now found to be fundamentally flawed," he said.

'Diabolical decision'

The immigration minister at the time the law was changed, Philip Ruddock, accepts the High Court ruling but says it will clog up Australia's legal system.

"In terms of being able to manage Australia's borders this will be a diabolical decision. It will increase rapidly the numbers of people seeking to access Australia," he said.

"I don't dispute the court's entitlement to come to a view. But the outcome will have very significant implications for Australia and the capacity to be able to manage our borders."

Mr Ruddock says the courts will struggle to cope with the number of cases.

"Once they access it for a preliminary decision if they don't like the outcome they will take a further appeal," he said.

"If they don't like that outcome they will take a further appeal. In the end all of them will end up before the High Court.

"I think the High Court will have a very, very, significant case load which they will have difficulty in managing."

Greens action

The Greens say they will introduce a bill next week giving all asylum seekers access to the courts.

Greens Senator Sarah Hanson-Young says the bill will ensure that all asylum seekers are able to ask the courts to review their cases.

"To ensure that we can deal with this problem and we don't leave unnecessarily asylum seekers languishing anxiously in the detention system - that is unfair, that is unjust," she said.

The Government has clearly been prepared for an adverse ruling from the High Court.

Mr Bowen says the decision has significant ramifications and he will make recommendations to Cabinet in the next few weeks on how the Government should respond.

"It's a judgment that has the potential to elongate the amount of time it takes to process refugee claims - that's what I mean by having significant ramifications," he said.

"The High Court has not found that the excision of certain islands in Australia is unconstitutional, the High Court has not in any way cast judgment on the mandatory detention regime in Australia.

"The High Court have found that refugee assessments and independent merits reviews are subject to judicial appeal, judicial review in certain circumstances."

Mr Bowen says the Government will continue processing refugee claims despite the High Court ruling.

Attorney-General Robert McClelland says the court judgment will have to be carefully examined.

"Orders have been made in favour of the claimants. We'll obviously have a look at that and the repercussions [as to] whether it's necessary to consider any additional review mechanisms," he said.