The PNG Supreme Court's decision comes at a difficult time for Broadspectrum, the company that manages the detention centres on Manus Island and Nauru under a 20-month contract announced in February last year.

Hostile takeover bid

Broadspectrum has been fighting off a hostile takeover bid from Spanish infrastructure group Ferrovial, and has told investors that it is better off alone than accepting Ferrovial's $1.50-per-share offer, which closes on Monday.

Most Broadspectrum investors have stuck by the board's recommendation to reject the takeover bid, with only 16 per cent of shares tendered into the offer to date.

But investors may be more inclined to accept the offer over the next few days if they believe Broadspectrum's earnings from the detention centres are now more uncertain. There's speculation the government and Broadspectrum will have to work on a new model for the detention centre, including the "open centre" model used on Nauru where detainees are able to move freely in and out, but unable to leave the island.

A spokesperson for the Broadspectrum said: "We note the ruling of the PNG Supreme Court and we're waiting on further instruction from our client, the Department of Immigration and Border Protection. We will update the market on any impact on our company."

Labor immigration spokesman Richard Marles said the PNG decision was a "significant concern" to Labor and Mr Dutton should fly immediately to Port Moresby to hold talks with the PNG government to consider alternatives.

PNG Prime Minister Peter O'Neill has previously said the Australian-run centres had harmed his country's reputation.

"Labor is seeking an assurance from the government that it has a contingency plan to deal with this today's ruling," Mr Marles said.

"This decision, and our government's response will be monitored by people-smuggling networks."

Mr Marles blamed the Coalition for the current constitutional problem because the facility was never meant to be a "punitive place of indefinite detention".