Canberra has come under international criticism for sending asylum-seekers who attempt to enter the country by boat to remote processing centres on Manus or the tiny Pacific island of Nauru but said the finding would not change its policies.

Papua New Guinea's then opposition leader Belden Namah challenged the Manus arrangement in court claiming it violated the rights of asylum-seekers.

In its 34-page finding on Tuesday Papua New Guinea's Supreme Court found that detaining asylum-seekers on the island was 'contrary to their constitutional right of personal liberty'.

'The detention of the asylum-seekers on Manus Island in Papua New Guinea... is unconstitutional and illegal' it said.

The court ordered the Australian and Papua New Guinean governments to 'take all steps necessary to cease and prevent' the continued detention of the asylum-seekers and transferees on Manus.

Around 850 men are held at the centre. Australian Immigration Minister Peter Dutton said the court's decision 'does not alter Australia's border protection policies - they remain unchanged'.

'No one who attempts to travel to Australia illegally by boat will settle in Australia' he said in a statement.

'Those in the Manus Island Regional Processing Centre found to be refugees are able to resettle in Papua New Guinea.'

'Those found not to be refugees should return to their country of origin.'

Under a policy accepted by both sides of politics in Canberra asylum-seekers found to be genuine refugees are denied resettlement in Australia.

They are instead urged to return home or be resettled in PNG or Cambodia under a policy designed to stop people-smuggling boats.

Rights campaigners on Tuesday welcomed the court's decision saying it was time for the Manus detention centre to be shut.

'PNG's Supreme Court has recognised that detaining people who have committed no crime is wrong' said Elaine Pearson director of Human Rights Watch in Australia.

'It's time for the Manus detention centre to be closed once and for all.'