The federal government concedes a permit for the live export of tens of thousands of sheep to the Middle East was wrongly granted.
Animals Australia took the federal Department of Agriculture and Emanuel Exports to the Federal Court in June, alleging a permit was unlawfully given for the shipment of 58,000 sheep out of Western Australia earlier the same month.
Court documents published on Friday show the department acknowledges errors in the granting of the permit, approved by official Narelle Clegg.
Animals Australia said the admission exacerbated concerns about the government's ability to regulate the controversial trade.
"That a department currently under review could allow 58,000 sheep to be exported on the basis of a legally-flawed export permit decision adds to their litany of regulatory failures," the organisation's legal counsel Shatha Hamade said in a statement.
A spokesperson for the department said a "technical deficiency" in the delegation of powers to Dr Clegg made the export permit invalid.
The "one-off" issue was resolved immediately and had no practical implications for that shipment, the department added.
The admission comes after Emanuel's licence was suspended and a permit for its sister company, EMS Exports, for a shipment of 45,000 sheep was denied following the airing of footage showing the death of sheep at sea.
The footage was recorded on an Emanuel Exports voyage to the Middle East in August and led to a review of the practice, which made 23 recommendations but did not call for it to be banned.
The department has been ordered to pay legal costs for Animals Australia and Emanuel Exports.