(BSS/AFP) - Russia`s government lost on Wednesday a legal bid at Australia`s High Court to build a new embassy less than a kilometre from the country`s parliament.

Russia was granted a 99-year lease in 2008 after paying nearly Aus$3 million ($2 million) for the site, which sat about 400 metres (yards) from the parliamentary precinct.

But the lease was revoked in 2023 after parliament passed a law preventing the project from going ahead.

Prime Minister Anthony Albanese at the time said the government had received "very clear security advice" from Canberra`s spy agency on "the risk presented by a new Russian presence so close to Parliament House".

That move sparked a years-long legal row between the two countries, with lawyers representing Moscow arguing the law was unconstitutional.

On Wednesday, the High Court upheld the law as valid.

But it also found that the Australian government was required to pay compensation to Russia.

Following the 2023 law change, Australia`s attempts to seize the land quickly were thwarted by a middle-aged Russian diplomat who squatted inside a small security shed on the site.

He faced frigid temperatures during his brief occupation, entertaining himself with television, snacking on vegetable chips and sporadically stepping out into the cold to smoke cigarettes.

The squatter was forced out just days later, after a preliminary High Court decision backed the government`s attempts to evict Russia from the site.