The Federal Court has thrown an eco-tourism venture at Lake Malbena into uncertainty after it called into question the federal government's approval of the project.
The Wilderness Society took the government to court over approval of the project which involves helicopter flights into the Walls of Jerusalem National Park within the Tasmanian Wilderness World Heritage Area.
A decision from Justice Debra Mortimer has set aside approval of the project and for the parties involved to negotiate conditions on the project.
The judgment appears to be a setback for the project after a recent win for its developers Daniel and Simone Hackett in the state's Resource Management and Planning Appeals Tribunal against a council decision to block it.
The Federal Court's judgement upheld two of three grounds for appeal from the Wilderness Society.
Wilderness Society campaign manager Tom Allen said the Environment Minister's approval would need to be reassessed and voluntary conditions on the project re-examined.
An application for the project does not need to be resubmitted by its proponents and the decision by the minister has not been overturned.
He said the court's decision called into question the viability of the state government's expressions of interest process for tourism projects in reserved areas.
"The decision-making process has been found wanting in a number of ways," Mr Allen said.
Environmental Defenders Office chief executive Nicole Sommer (pictured) said the decision would allow for conditions on the project to be enforceable.
"This will give some clear and transparent parameters around how the development should be carried out," she said.
Justice Mortimer ordered parties to make submissions following the decision to the Federal Court for assessment by November 26.
Mr Allen said the Wilderness Society was still considering an appeal against RMPAT's decision to back the project.
Mr Hackett was contacted for comment.