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An Australian-run migrant camp in Papua New Guinea is illegal, the Supreme Court in Port Moresby said Tuesday, arguing that it breached the right to personal liberty of those detained.

"The asylum seekers had no intention of entering and remaining in PNG. Their destination was and continues to be Australia," the five-man court bench said.

The arrangement for the Manus Island camp was "outside the constitutional and legal framework in PNG," the court ruled in the landmark case filed by the country's opposition leader Belden Norman Namah. 

There are 850 men in the detention centre on Manus Island, seized while trying to make the boat crossing to Australia, which has vowed all asylum-seekers arriving by boat will be processed offshore.

The court ordered the governments of Papua New Guinea and that of Australia to immediately take steps to end the detentions.

The ruling "does not alter Australia’s border protection policies," Canberra's Immigration Minister Peter Dutton said. "No one who attempts to travel to Australia illegally by boat will settle in Australia."

Namah's lawyer Laoni Henao said the arrangement with Australia "was not in the interest of this country," but rather "for the benefit of a foreign country - that country being Australia."

"The government of this country was influenced by a foreign country to amend the constitution," he told reporters in Port Moresby. "That is disgraceful."

Dutton said detainees given refugee status "are able to resettle in Papua New Guinea. Those found not to be refugees should return to their country of origin."

He also said the agreement was negotiated by the previous Labor government.

Richard Marles, Labor's immigration official, said former prime minister Julia Gillard had signed just a 12-month contract "in the expectation that the vast bulk of people would be processed and settled in that period of time."

"Instead, we've seen a complete failure on the part of the Turnbull government," he told the local broadcaster ABC.

Another politician, Sarah Hanson-Young, said the government has no other option but to bring all the remaining detainees to Australia.

"They've seen two of their colleagues in the detention center die, one at the hands of guards and another because he had an infected foot which became septic," the Green Party senator said. 

Human rights activists lauded the landmark decision.

"For these men, their only mistake was to try to seek sanctuary in Australia – that doesn’t deserve years in limbo locked up in a remote island prison," said Elaine Pearson, Australia director at Human Rights Watch, adding the centre should be closed and never reopened. 

Last month, Papua New Guinea's Prime Minister Peter O'Neill said in Canberra that he wanted the regional processing centre to close, but his country "does not have the resources" to resettle the refugees.​

​The centre had "done a lot more damage for Papua New Guinea than anything else," he told reporters.

"We need to process them, we need to resettle them, we need to move them back to their country of origin if they are not genuine refugees, but we cannot hold them there forever."

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