The decision, being followed closely by media and health authorities both nationally and internationally, pits the right of the B.C. government to manage health care against the federal government's jurisdiction over the Criminal Code.
The decision will play a major role in determining whether similar facilities are established elsewhere in Canada, and interest has already been expressed to follow Insite's lead in provinces such as Alberta and Quebec.
"If you're successful here, there could be Insites all over the country," Supreme Court Judge Marshall Rothstein told an Insite lawyer during the May hearing.
The facility in Vancouver's Downtown Eastside, which provides clean needles to addicts as well as supervision from professional nurses, was established in 2003 under a special exemption from federal drug laws.
But Prime Minister Stephen Harper's government, which has championed a tough law-and-order agenda, refused to extend the exemption in 2008 and has attempted to shut it down.
Two B.C. court decisions backed the B.C. government's position that Insite should be allowed to remain open. Supporters of the facility have cited research showing that supervision has reduced both overdose deaths and the spread of HIV-AIDS in an area where needle-sharing is common.
But critics, including former Tory health minister Tony Clement, have argued that such so-called "harm reduction" programs divert money from addict treatment programs.
Federal prosecutors also argue that governments should not be in the business of facilitating illegal drug use.
"The state has no constitutional obligation to facilitate drug use at a specific location by hardcore addicts, the mildly addicted, frequent users or occasional users," federal prosecutors said in a written court submission.