The Australian and Torres Strait Islander Commission (ATSIC) has lodged a writ with the High Court to challenge whether the Federal Government has the power to re-direct its funds through an executive body.

The Aboriginal and Torres Strait Islander Services group, known as ATSIS, began operating in July last year.

Under the new arrangement, the ATSIC board has continued to make policy decisions, while the new body has handled funds of up to a billion dollars for Indigenous programs.

ATSIC Commissioner Rick Griffiths says he believes the powers of the commission have been usurped by the change.

"It's not illegal, I don't believe, to establish the executive agency but what I do believe is illegal, and we're hoping to prove it in the High Court of Australia, is the fact that they have taken the statutory functions of ATSIC away from them and this really sets a dangerous precedent," he said.