The next stop for Chris Bowen could be Nauru.
Today's setback has been delivered to a government that's looking increasingly embattled.
Our political correspondent Tom Iggulden was in the High Court in Canberra for today's landmark decision.
TOM IGGULDEN, REPORTER: The Prime Minister's response to the High Court decision was brief and telling.
JULIA GILLARD, PRIME MINISTER: Nothing in it is going to diminish our resolve to break the people smuggler's business model. We will study the decision though. Thank you very much.
TOM IGGULDEN: The Government fought long and hard for the Malaysia solution and now it's in tatters.
CHRIS BOWEN, IMMIGRATION MINISTER: Let's make no bones about it: today's decision by the High Court is a profoundly disappointing one.
TOM IGGULDEN: Others say the decision's a triumph for the legal system.
JULIAN BURNSIDE, HUMAN RIGHTS LAWYER: It takes some intellectual strength for courts to stand up and say that a government is wrong.
TOM IGGULDEN: The Government's defence of its policy rested on an affidavit the court requested of Chris Bowen to back up legal claims that Malaysia would protect the human rights of asylum seekers Australia sent there.
In it, the minister said following personal talks with his Malaysian counterpart, he was convinced Kuala Lumpur was, "... keen to improve its treatment of refugees and asylum seekers ...," had, "... made a significant conceptual shift ...," and was, "... committed to a new approach."
But Chief Justice French and five of his colleagues said that wasn't enough, judging that, "... it is clear that he did not look to ... any basis for his declaration in Malaysia's international obligations or relevant domestic laws."
JULIAN BURNSIDE: And if they do not offer that sort of protection, well then we can't simply shunt them over there without processing their claim for protection.
TOM IGGULDEN: The judgement also says the minister had to take into account Malaysia's track record, including the caning of asylum seekers.
DAVID MANNE, ASYLUM SEEKERS LAWYER: The court has now ruled that it would be unlawful to expel them to that type of situation.
SCOTT MORRISION, OPPOSITION IMMIGRATION SPOKESMAN: The minister should have known that. He didn't think it through. He's been found out by the High Court.
TOM IGGULDEN: The lawyer who brought the case says his clients are relieved.
DAVID MANNE: They were absolutely petrified of being sent there, very frightened.
TOM IGGULDEN: Right through this process, the Immigration Minister's argued that the Government's been on safe legal ground. He can't appeal today's decision, and even if he finds other ways around it, today's judgement has dealt a serious blow to the Government's credibility.
The Coalition's making the most of the disruption.
SCOTT MORRISION: A government that just simply can't get anything right.
TOM IGGULDEN: The minister's keeping an open mind about re-opening the Nauru detention centre and reintroducing temporary protection visas, hallmarks of the Howard Government's Pacific Solution.
CHRIS BOWEN: I'm not ruling anything in or out in terms of our response.
TOM IGGULDEN: But the High Court decision could limit the Government's options.
CHRIS BOWEN: There are potential ramifications for offshore processing generally. We've sought advice on that.
TOM IGGULDEN: The Malaysian solution failed in the High Court partly because Kuala Lumpur isn't a signatory to the UN Convention on Refugees. The Government's been negotiating a potential backup deal with Papua New Guinea. It is a signatory to the convention, but that may not count in the High Court.
KATHE GAUTHIER, CHILLOUT COALITION: Because what they're saying is that you need to have effective protection in place. It's not just about whether or not you're signatory to the convention.
TOM IGGULDEN: Confidential internal UNHCR documents obtained earlier this year by Lateline leave little doubt Papua New Guinea would fail that test. Dated May this year, the document says, "... there is no effective legal or regulatory process to address refugee issues ..."
It adds the country has, "Few or no immigration officers with any notion of refugee protection." And in summary it notes, "The PNG government offers no resources for the care, maintenance, support or protection of asylum seekers or refugees."
Another offshore processing deal that appears headed for trouble.
Tom Iggulden, Lateline.
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