The federal government is wading into a dispute over the leadership of the N.W.T.'s Salt River First Nation after an arbitrator overturned the band's August election results this week.

The government may appoint an administrator to run the Fort Smith band's operations until a new election can be held, said George Cleary, director of Indian and Inuit services.

"Our priority is making sure the band keeps running," Cleary said.

The 850-member First Nation, with an annual budget of $90 million, has been plagued by political infighting for several years.

Shortly after Frieda Martselos and the new council were elected in August, the results were challenged by her closest competitor, David Poitras.

Poitras, who lost the leadership race by 28 votes, accused Martselos of using smear tactics against him and his supporters during the campaign.

This week, arbitrator Kate Hurlburt, an Edmonton-based lawyer, agreed with Poitras and ruled a new election had to be held in 60 days.

Although Martselos has vowed to fight Hurlburt's ruling in a federal court, Cleary said he's not sure if that's legally possible since Martselos agreed to participate in the binding arbitration process.

Her opponents say the arbitrator handed the dispute back to the band's membership and that's how it should be settled.