Yukon's free entry mineral staking rules are in jeopardy after a ruling from the Yukon Court of Appeal.

The court says mining claims can have serious impacts on aboriginal title and government must use discretion before registering those claims.

The lawsuit by the Ross River Dena challenges the free entry staking system in the territory and the government's right to register mining claims without consulting affected First Nations.

Yukon courts recently ruled that government only has to give notice after new mining claims have been registered.

But this week's ruling from the Court of Appeal says simply giving notice is not enough.

It says under the existing rules prospectors and miners have the potential to do serious, long-term damage to First Nation claimed lands.

The court says government has the discretion to refuse mining claims in sensitive areas and it must use that discretion where First Nation rights are at risk.

Ken Coates is a Canadian historian with expertise on Yukon land claim issues.

"This may be one of those court decisions, if it's held up by the Supreme Court down the line, that really changes the way we approach resource development in Canada." said Coates.

The court says Yukon mining legislation will have to be amended to reflect its constitutional duties to affected First Nations.

It's given the government one year to comply.