The Federal Court has handed First Nations groups and child-welfare advocates a victory.

In a much-anticipated ruling Wednesday morning, the court has rejected the federal government's attempts to prevent First Nations groups from arguing for better funding for child welfare on reserves.

The ruling means First Nations and the federal government will have a full-blown hearing about whether Ottawa is treating native children unfairly.

"It's a real victory for all the children who have waited so long for this," said Cindy Blackstock, who heads the First Nations Child and Family Caring Society of Canada and spearheaded the legal challenge.

First Nations groups say Ottawa is discriminating against native kids because the support the feds provide for child welfare on reserves is much lower than what kids off reserves get from provincial governments – even though the need is greater.

Blackstock figures the federal government should be spending about $200 million a year more, in order to just match the level of service the provinces deliver to non-aboriginal children.

But the federal government has tried to block the case on technicalities, saying it was not fair to compare federal services to provincial services.

The Canadian Human Rights Tribunal initially sided with the apples-and-oranges argument from the government, and rejected the case without hearing substantive arguments. But today, the Federal Court disagreed, and has ordered the tribunal to hold a new hearing, under a completely new panel of decision-makers.

"It's a real slap to the tribunal. They have to go back to the drawing board," said Carolyn Bennett, the Liberals' aboriginal affairs critic.

Ruling opens door to challenges

Officials in Aboriginal Affairs Minister John Duncan's office did not immediately respond to requests for comment.

The ruling opens the door to similar challenges on federal funding to First Nations for education, policing and health, according to the Canadian Human Rights Commission.

The ruling from the judge, Anne Mactavish, said that in day-to-day practice, the federal government frequently compares its own child welfare services to services delivered by provinces. "The tribunal erred in failing to consider the significance of the government's own adoption of provincial child welfare standards in its programming manual and funding policies," she writes.

The prevalence of First Nations children in child-welfare system across Canada is far higher than for non-aboriginal children. There are far more native children in care now than at the height of the residential school system.

A recent study of maltreatment of First Nations children found that children on reserves are far more likely to be living in a problematic situation than non-aboriginal children. The national study found that First Nations children are eight times more likely to be subjected to neglect, and 4.7 times more likely to be exposed to violence.

For years, the First Nations Child and Family Caring Society of Canada as well as the Assembly of First Nations have argued that the federal government would be better off funding prevention services and supports for families, rather than paying for foster care.

"The difficulties facing many of the families involved in these First Nations child welfare investigations may require programs offering longer-term, comprehensive services designed to help them address the multiple factors – such as poverty, substance abuse, domestic violence and social isolation – which pose chronic challenges to their abilities to ensure the well being of First Nations children," the report concludes.

The federal government has recently started moving in that direction, but slowly.