Former Australian of the Year Galarrwuy Yunupingu is acting on behalf of his people, the Gumatj clan, in a Federal Court case claiming up to $700 million over a Gove Peninsula mine approved in the 1960s.
He's previously said the mine was forced on the local Yolngu people despite their opposition.
The Commonwealth argues that native title rights come with conditions; namely, that the Commonwealth still has "radical title" to use its land even when it's inconsistent with native title rights.
If native title rights and radical title rights are inconsistent, the Commonwealth can withdraw its recognition of the former, and it is always susceptible to being "defeated" by radical title, Nitra Kidson KC told the court on Monday.
Native title was essentially given recognition on the basis it would not interfere with colonies being set up, so it is "inherently defeasible", Ms Kidson argued.
When asked how big a point that was in terms of how native title law is being administered in Australia, Ms Kidson said: "certainly, from a compensation perspective, it's potentially huge".
However, she noted the Commonwealth could only exercise the power in the NT and ACT.
The Commonwealth also argues that the 1969 case of Teori Tau still stands, despite an assertion it has since been overturned.
That case found that the federal government didn't have to stick by a rule of having "just terms" when it acquired property in the NT.
Stephen Lloyd SC, acting for the Commonwealth, argued the decision wasn't ultimately overruled, despite a later case saying it was.
"A previous binding decision of the High Court can only be replaced by another binding principle," he said.
The hearing continues.
