(Corrects currency conversion in paragraph three)

By Moira Warburton and Anna Mehler Paperny

(Reuters) -A human rights tribunal ruling ordering the Canadian government to compensate indigenous children and families in foster care for discrimination should stand, a federal court decided on Wednesday.

In 2016, the Canadian Human Rights Tribunal found that federal funds were allocated for indigenous families and children more frequently than non-indigenous persons. This resulted in more Indigenous children being placed into foster care.

The tribunal’s ruling in 2019 was appealed by Justin Trudeau, Prime Minister of Canada, and ordered that each child affected be paid C$40,000 (31,496). This is the maximum amount allowed under the Canadian Human Rights Act. In addition, with certain exceptions the tribunal said that parents and grandparents of affected children may also be entitled to compensation.

Justice Paul Favel, Federal Court Justice, rejected the appeal of the government and encouraged both parties to keep negotiating.

Favel said that “the parties must decide whether or not they will continue to stand beside the trail” and was referring a Native American parable of a man who stands beside a trail so long it overtakes him, and then loses his path.

Federal government is likely to be hit with billions of dollars by the tribunal’s decision.

Trudeau could appeal against the court’s ruling. The government of Trudeau has in the past argued that while the court found no discrimination, the tribunal overstepped its bounds by granting compensation.

Indigenous Services Canada (the ministry that oversees foster children) did not respond immediately to a request for comment.

Cindy Blackstock was the executive director for the First Nations Child and Family Caring Society, which brought the original complaint. She welcomed the ruling and called it “a complete rejection all of the government’s false arguments and a win for the kids.”

After the discovery of hundreds of unmarked graves at sites where former residential schools were located, scrutiny has increased on Canada’s legal fights with indigenous people.

The Canadian residential school system was used to separate children from their parents and send them off to boarding schools. There they were malnourished and beaten and sexually assaulted in what Canada’s Truth and Reconciliation Commission referred as “cultural genocide”.

($1 = 1.27 Canadian dollars)