A Hong Kong court ruled Friday that a law banning foreign maids from permanent residency in the city is unconstitutional, in a landmark case that could pave the way for a flood of applications.

The legal action brought by Evangeline Banao Vallejos, a Filipino domestic helper who has lived in Hong Kong since 1986, has cast a spotlight on the financial hub's treatment of its army of 292,000 domestic workers.

The High Court ruled that immigration laws barring domestic workers -- mostly from the Philippines and Indonesia -- from settling permanently violated Hong Kong's mini-constitution, known as the Basic Law.

"The mere maintenance of link with her country of origin does not mean that (a maid) is not ordinarily resident in Hong Kong," Judge Johnson Lam wrote in a 78-page judgement.

Under Hong Kong law, foreigners can apply to settle in the city after seven years of uninterrupted residency, but maids were specifically excluded.

Vallejos challenged the restriction, saying it was unconstitutional and discriminatory, but the government argued in court it was "appropriate" and that it is empowered to define who is eligible for residency.

"I am disappointed, but we are fully prepared for any court ruling," Hong Kong's chief executive Donald Tsang said in a brief reaction, adding that the immigration authorities are studying the decision.

The government has previously indicated it would appeal any ruling in favour of domestic workers.

Vallejos' lawyer Mark Daly lauded the High Court's decision as "a good win for the rule of law" and that Vallejos "thanks God and all the people who have helped her, including her employer and her lawyers."

"She is busy working so she has no time to be here today," he added.

The governments of the Philippines and Indonesia applauded the decision as a welcome recognition of the contribution of their citizens, millions of whom work abroad.

"We hope that this decision is seen as a benchmark and that other countries do the same," Gusti Made Arka, Indonesia's labour ministry director-general of workers abroad, told AFP.

Philippine Vice President Jejomar Binay said it was an important step forward in enshrining migrants' rights.

Critics of the legal action have said it will open the floodgates to new immigrants in an already overcrowded and expensive city.

A pro-government political party has warned the decision could see an influx of as many as 500,000 people -- including children and spouses of foreign maids -- that would cost billions of dollars in social welfare spending.

Immigration authorities have declined to say how many maids would be eligible to apply for permanent residency.

Outside the High Court, supporters of the legal action duelled with groups opposing maids' residency rights, in an angry protest involving several dozen people.

"Hong Kong is for Hong Kong people, please go back," the critics chanted.

"We are sad, angry and disappointed. A huge number of the domestic workers are going to migrate to the city and it will strain our resources," said Jeff Lam, spokesman for Hong Kong Social Concern Group.

Friday's ruling could have implications beyond Hong Kong for other Asian economies that rely on cheap imported labour for cooking, cleaning and care of the young and elderly.

Foreign maids in Hong Kong are entitled to better working conditions than in other parts of Asia -- they are guaranteed one day off a week, paid sick leave, and a minimum wage of HK3,740 ($480) a month.

But rights groups say they still face general discrimination and a lack of legal protection. A maid's visa is tied to a specific employer, leaving her vulnerable, the activists say.

Another court hearing will be held on October 26 on whether Vallejos can now be declared a permanent resident,

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