The court's full bench heard the case brought by a Palm Island woman, Joan Maloney, whose lawyers argue her alcohol-related conviction was based on a racist law.
A majority of judges found while the law was inconsistent with the Act, they ruled it did not apply because the alcohol management plans were exempted under "special measure" provisions.
Stefan Armbruster reports.
(Transcript from World News Australia Radio)
Palm Island woman Joan Monica Maloney was convicted in 2010 under Queensland laws restricting alcohol in 19 Aboriginal and Torres Strait island communities.
Australia's High Court has ruled that while the law is racially discriminatory, it is a "special measure" under the Racial Discrimination Act, and so is exempt.
That means Ms Maloney's conviction stands, as do more than 13,000 other convictions since the laws were introduced.
Ms Maloney was not giving interviews to the media but Peter Coombe -- the lawyer who represented her and formerly with the Aboriginal and Torres Strait Islander Legal Service -- was.
"My personal view is that any legislation which has the effect of turning decent, honest people, which is what the majority of residents of Palm Island are, of turning them into reluctant criminals by virtue of purchasing alcohol, is a bad law."
Palm Island's mayor is Alf Lacey.
"I think it is disappointing. Alcohol, yes it is a problem in our community. It's also a problem in a lot of non-Indigenous communities too, but I don't see any 'special measures' being implemented in those communities. Palm is like every other community: you'll always have a rotten egg in the crowd tarnishing everyone with the same brush. It's probably not the best way to implement 'special measures' into a community."
The full bench of the High Court in Canberra said the special measure provision of the Racial Discrimination Act allows laws like the alcohol management plans because they protect the resident of communities like Palm Island from the effect of alcohol abuse and related violence.
The restrictions do not apply to any non-Indigenous community.
The Queensland government and the minister for Aboriginal and Torres Strait Islander Affairs, Glen Elmes, applauded the decision.
"The Queensland government is very pleased with the result and we can now continue to work with the community of Palm Island - and all the discrete [separate] communities for that matter - so that the review of our alcohol management plans progress not only for the benefit of Palm, but all the discrete communities."
There was also relief from the Queensland Police Union, who feared lifting the alcohol restrictions would result in a flood of alcohol into the communities.
The Aboriginal and Torres Strait Islander Social Justice Commissioner, Mick Gooda, says governments must now renew efforts to tackle alcohol and violence, using a community-based approach.
"We decided as a commission to intervene in this case not to take sides but argue the principle of equality before the law, and to clarify the issue around the application of 'special measures' and the issue around consultation and consent. We'd argue that we've got to do something in Australia about the affect of alcohol abuse, the violence in our communities, but we'd also argue that the best response is where the community takes responsibility."
The Human Rights Commission's submission to the court did not argue alcohol was a human right, simply that the law must apply equally to all, unless consent from the community affected was granted otherwise.
The High Court did not accept arguments that the Palm Islanders had not been properly consulted about the "special measure".
Palm Island mayor Alf Lacey says the decision is disempowering for Aboriginal people.
"Consent from any community is really important, certainly in deciding the future of any of our communities, there's a big question mark over it now, in terms of any approach whether it's alcohol, health, housing or stuff, there'll always be the 'big daddy' [paternalistic] mentality in terms of we'll do what's right for you."
Alf Lacey himself is due before the courts in September but is not commenting on his case.
The High Court decision ends a long journey for Ms Maloney who was fined $150 in 2010 for possessing bottles of rum and whisky on Palm Island.
Appeals against her conviction were also dismissed by the District and Queensland Court of Appeal and she will now have to pay the fine.
Residents of Palm Island will continue to be restricted to possessing not more than one 30-can carton of light or mid-strength beer.
Other communities have total bans and some have higher alcohol limits.
But fines of up to $75,000 and 18 month's jail apply for breaches, as well as a criminal record.
Joan Maloney's lawyer, Peter Coombe, says the problems will remain.
"I do not believe for one moment that, however active the police are in enforcing the law which is their job, that they will stamp out the sly grogging that goes on, because of the vast profits that are made by those engaged in sly grogging -- that will definitely continue."
In 2012 the number of alcohol-related charges against Palm Islanders doubled to 270 from the previous year.
The High Court decision also puts the Queensland courts under pressure.
More than 580 appeals and another 100 outstanding charges against Palm islanders alone are pending after being put on hold pending the High Court decision.
The Queensland government is currently reviewing the alcohol management plans for all 19 communities.
Minister Glen Elmes says he thinks it will be some time before communities are ready for restrictions to be totally lifted.
"I can't see that we're at that point. What I have said to the mayors and councillors is that unlike what was put in place five years ago, and it stayed rigid, none of the plans have moved, I see this as a bit of a moveable feast. If a community comes to government and says here is our plan, here is how we are going to drive these harm levels down, here is how we are going to protect our women and children and it's working, why shouldn't, after 12 months or 2 years, the community come back and ask for a relaxation?"
But lawyer Peter Coombe says governments have to look at the broader problem.
"Too many people see alcohol as being the problem on Palm Island; that is not the case. Alcohol is the consequence of the problems on Palm Isand, where there is no economic activity of any sort to give people some sort of hope and allow them to do the things that the vast majority of people can do: have a job, buy a home, buy a car, whatever."