The Federal Court is to hear a "top secret" appeal by the Australian government aimed at suppressing information from a diplomatic file on Indonesian military war crimes in East Timor more than 30 years ago.

The highly unusual legal case, which involves a mystery government witness identified only as "X", is likely to set important precedents for how courts determine national security matters.

Sensitive case: Attorney-General George Brandis has issued a "public interest certificate" that excludes Dr Clinton Fernandes and his legal representative from hearing evidence presented by government witnesses. Credit:Alex Ellinghausen

In a late development prior to Monday's hearing, the government upgraded the secrecy of the proceedings by obtaining an order from the court for its submissions and evidence to be treated as "top secret" – information that if disclosed would cause "exceptionally grave damage" to national security.

The case arises from a decision in April by Administrative Appeals Tribunal president Justice Duncan Kerr who ruled that the National Archives was right to deny University of NSW Associate Professor Clinton Fernandes access to parts of two Department of Foreign Affairs files dealing with an Indonesian military offensive across East Timor in 1981.