The courts will continue to operate with the current legal aid system for the timebeing despite the Court of Appeal ruling it unlawful.
The Criminal Bar Association (CBA) launched court proceedings after the Government's cost-saving shake-up of the legal aid system, which resulted in legal aid lawyers getting a 10 per cent pay cut.
The CBA lost a High Court case but took it to the Court of Appeal, which today held that the Legal Services Commissioner, who is responsible for granting legal aid, was unable to function independently of the Government.
Despite this, Ministry of Justice chief executive Andrew Bridgman said nothing would change for the timebeing.
"The ministry is carefully considering the judgement and its implications. We are doing this urgently, but in the meantime, for legal aid clients, nothing will change that affects the delivery of services, and lawyers will continue to be paid on the current basis pending a decision on what changes need to be made."
CBA president Tony Bouchier hoped the Government would go back to the drawing board and come up with a solution that was be acceptable to both parties.
"One might say that this is probably quite damaging politically because what we've got is a policy that has been operating illegally for some period of time.
"We've always been concerned that the new system of legal aid is far too rigid, it's not working and we're losing far too many good lawyers. The people that are victims of that process are the poor, because the people that can afford it will always be able to get good lawyers. It's now for the Government to consider its position as far as the decision is concerned and come up with a way to turn this ship around."
Auckland District Law Society vice president Brian Keene QC said the judgement was a victory for defendants and their counsel.
"The right to a proper defence is a right of all New Zealanders. It must deliver access to justice regardless of financial circumstances. We believe that limiting legal aid payments would have limited the way criminal barristers defend their clients, and so result in unsafe convictions," he said.
The changes to legal aid came after a report by Dame Margaret Bazley which found systemwide failings and called for urgent action to rebuild trust in the system.
The Bazley report resulted in a fixed fees programme for criminal legal aid, which standardised the cost of all cases, regardless of how much time they involved. It still gave lawyers the ability to seek more money for complex cases.
Previously, lawyers had been paid at an hourly rate, and the shake-up meant legal aid lawyers were being paid an average of about 10 per cent less.
Justice Minister Judith Collins said she hadn't seen the Court of Appeal's judgement yet.
"The Ministry of Justice is considering the decision and its implications and will provide advice to me as soon as this has been completed."