SYDNEY - Australia's highest court on Wednesday scuttled government plans for a refugee swap with Malaysia in a major policy setback for embattled Prime Minister Julia Gillard.
Australia and Malaysia signed an agreement in July under which Australia will accept 4,000 asylum seekers currently in Malaysia, in return for sending 800 arrivals in Australia to Malaysia where their refugee claims would be processed.
Gillard signed the Malaysian deal to deter people smugglers, and to fight perceptions her government was soft on asylum seekers. But lawyers for two asylum seekers asked the High Court to declare the people swap illegal, because Malaysia had no legal guarantees to protect the rights of asylum seekers.
Australia is a signatory to the UN convention on refugees but Malaysia is not.
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