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The sweeping 9-0 decision will take effect in one year, inviting Parliament to try to come up with some other way to regulate the sex trade if it chooses to do so.
Prostitution is technically legal in Canada but most related activities have been illegal, including living off the avails of someone else's prostitution. The court found these prohibitions were overly broad or grossly out of proportion to the law's goals.
Chief Justice Beverley McLachlin said a law that banned what she called "safe havens" for prostitutes exposed them to risks from predators. She said many prostitutes had no choice but to work in the sex trade, and the law should not make their work more dangerous.
"The impugned laws deprive people engaged in a risky, but legal, activity of the means to protect themselves against those risks," she wrote. "It makes no difference that the conduct of pimps and johns is the immediate source of the harms suffered by prostitutes."
One current prostitute and two former ones, including a dominatrix, had initiated the challenge to Canada's laws, arguing that sex workers would be safer if they were allowed to screen clients, or so-called johns, and operate in brothels with bodyguards if they chose.
One of the plaintiffs, retired dominatrix Terri Bedford, dressed in black leather, cracked a riding crop with a whoop in front of reporters in the Supreme Court lobby as she declared it was a "great day for Canada, for Canadian women from coast to coast."
Another former prostitute, Valerie Scott said the Supreme Court had for the first time in Canada declared those in the sex trade to be persons.
However, Janine Benedet, who argued before the court for the Women's Coalition for the Abolition of Prostitution, said Parliament should make pimping and the buying of sex illegal: "There is no constitutional right to buy a woman for sex."
McLachlin dismissed the federal government's argument that it was prostitution itself, not the laws that govern it, that puts prostitutes at risk.
The safety of prostitutes became a high-profile issue in Canada following the trial and 2007 conviction of serial killer Robert Pickton, who preyed on prostitutes and other women in Vancouver's Downtown Eastside neighborhood.
"A law that prevents street prostitutes from resorting to safe havens...while a suspected serial killer prowls the streets, is a law that has lost sight of its purpose," McLachlin wrote.
Prostitution is legal in much of Europe and Latin America, and brothels are legal in numerous countries including the Netherlands, Germany and Switzerland. But questions have begun to be raised, partly because of human trafficking. France's lower house of parliament passed a law this month imposing stiff fines on clients.
"How prostitution is regulated is a matter of great public concern, and few countries leave it entirely unregulated," McLachlin wrote in explaining why she suspended the effect of the judgment for a year.
She said her decision "does not mean that Parliament is precluded from imposing limits on where and how prostitution may be conducted," noting that various provisions were intertwined.
"Greater latitude in one measure - for example, permitting prostitutes to obtain the assistance of security personnel - might impact on the constitutionality of another measure - for example, forbidding the nuisances associated with keeping a bawdy house (brothel)."
Federal Justice Minister Peter MacKay expressed concern with the decision and said the government was "exploring all possible options to ensure the criminal law continues to address the significant harms that flow from prostitution to communities, those engaged in prostitution, and vulnerable persons."
The idea of criminalizing the purchase of sex and of pimping follows what has become known as the Swedish model and then more broadly the Nordic model as Norway followed suit.
Evangelical Fellowship of Canada lawyer Don Hutchinson said the evidence was that the decriminalization of prostitution leads to increased rates of human trafficking. He said his organization had last week submitted to Parliament a report urging an adaptation of the Swedish model.
In the mean time, the prostitutes' lawyer, Alan Young, said he expected that for the next year police and prosecutors would likely go easy on enforcing the current laws in light of Friday's decision.
The name of the case is Canada (Attorney General) v. Bedford, 2013 SCC 72.
(Reporting by Randall Palmer; Editing by Chizu Nomiyama, Peter Galloway and Andrew Hay)
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