By Phil Mercer BBC correspondent in Sydney

In a landmark decision judges unanimously said Mr Qarase breached the constitution when he excluded MPs from the Fiji Labour Party from his cabinet after an election almost two years ago.

The court said the situation must be rectified immediately.

It now requires the prime minister to consult with the leader of the Labour Party and select persons from the Labour Party for cabinet appointments Fiji Chief Justice Daniel Fatiaki

Mr Qarase has said he will abide by the Supreme Court decision.

He indicated he would now hold talks with the leader of the Fiji Labour Party, Mahendra Chaudhry.

The court ruling was a serious blow to Laisenia Qarase.

His administration has effectively been declared illegal.

The nationalist Prime Minister had said the constitution's power-sharing arrangements - designed to promote multi-party and multi-racial government - would simply lead to unworkable government.

Unconstitutional

In a 60-page judgement, the Supreme Court in the Fijian capital, Suva, decided Mr Qarase's exclusion from cabinet of his political rivals was unconstitutional.

The coup in 2000 deeply divided the Pacific island along racial lines

The law states that the larger opposition parties must have representation at the top table of government in proportion to how well they do at the polls.

The Fiji Labour Party, for example, is entitled to almost 40% of seats.

The system, clearly flouted by Prime Minister Qarase since an election in 2001, is meant to foster cooperation and racial harmony.

Fuelling tensions?

Instead of inviting Labour into cabinet, Mr Qarase formed a coalition with the Conservative Alliance.

It's a hardline indigenous party closely associated with George Speight.

The failed businessman led an armed coup against Fiji's first ethnic-Indian Prime Minister, Mahendra Chaudhry, three years ago.

Speight is serving a life sentence for treason, while Mr Chaudhry, as leader of the Labour party, is enjoying his victory after this pivotal constitutional showdown.