The suspended mayor of the Vanuatu capital, Port Vila, Willie Pakoa, and his 13 councillors are suing the government claiming the internal affairs minister George Wells' actions were illegal.
Mr Wells has suspended the council until new elections are held in 2013 but Mr Pakoa says the Municipal Act clearly states that a suspension cannot exceed six months.
The minister took this action after a report on the financial state of the council showed debts of more than 11 million US dollars.
Mr Wells has appointed Olga Tari as commissioner of Port Vila.
Mr Pakoa says if they succeed in their challenge, each of the councillors will claim 130 thousand US dollars from the government.