Reuters International

Protesters react as they hold placards and listen to speakers during a rally in support of refugees in central Sydney, Australia, October 19, 2015. REUTERS/David Gray/File photo

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By Colin Packham

SYDNEY (Reuters) - Papua New Guinea said on Wednesday it will close an Australian immigration centre on a northern island after its Supreme Court ruled it unlawful, but Australia ruled out accepting more than 800 asylum seekers detained there.

Immigration Minister Peter Dutton stressed the success of Australia's hard-line policy that has been strongly criticised by the United Nations and human rights agencies.

Under Australian law, anyone intercepted trying to reach the country by boat is sent for processing to camps on the tiny Pacific island of Nauru or to Manus Island off Papua New Guinea. They are never eligible to be resettled in Australia.

Papua New Guinea Prime Minister Peter O'Neill said the detention centre would close after Papua New Guinea's Supreme Court ruled on Tuesday that the detentions breached the country's constitution and would have to stop.

Dutton said that it was still government policy that asylum seekers sent to offshore detention centres would never be resettled in Australia.

"As I have said, and as the Australian government has consistently acted, we will work with our PNG partners to address the issues raised by the Supreme Court of PNG," Dutton said in a statement after the announcement.

O'Neill said he would ask Australia to make arrangements for the asylum seekers held on Manus Island, adding that they would be able to stay in Papua New Guinea if they wanted.

A spokesperson for Dutton did not immediately respond for requests for comment on the closure but Dutton said in Melbourne that the Manus detainees could return home or go to another country willing to accept them.

The detainees on Manus and Nauru are mostly refugees fleeing violence in the Middle East, Afghanistan and South Asia.

While Australia maintains its hard-line stance, a second case concerning the fate of the detainees on Manus is set to be heard by the Papua New Guinea Supreme Court later this week.

Lawyers acting on behalf of nearly all the Manus Island detainees will argue that they should be taken to Australia and be compensated for being held in custody.

The detention centre on Nauru houses about 500 people and has been widely criticised by the United Nations and human rights agencies for harsh conditions and reports of systemic child abuse.

Against such a backdrop, many of the detainees have self-harmed, with Dutton on Wednesday confirming that a 23-year-old man from Iran had set himself on fire on Nauru.

Dutton said the man would be evacuated from Nauru later on Wednesday.

Broadspectrum Ltd <BRS.AX>, which runs the detention centres on Manus and Nauru, declined to comment.

(Additional reporting by Jane Wardell and Matt Siegel in SYDNEY; Editing by Nick Macfie)

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