By Anna Mehler Paperny

TORONTO (Reuters) -Canada's Supreme Court on Friday upheld an asylum-seeker pact between Canada and the United States but sent the case back to a lower court to determine whether the contested agreement violates equality rights.

Under the Canada-U.S. Safe Third Country Agreement, which came into effect in 2004, asylum seekers who cross the land border between the two countries are turned around and sent back on the grounds that they should apply for asylum in the first "safe" country they arrived in.

Built-in safety valves such as public policy exemptions that allow some asylum seekers to remain in Canada mean the agreement does not violate asylum seekers' right to life, liberty and security of the person, the Supreme Court ruled. But it sent the case back to federal court for a ruling on whether the agreement breaches asylum seekers' right to equal treatment under the law.

Refugee advocates argue the agreement violates that right because they say the U.S. is less receptive to refugee claims based on gender.

The two countries amended the agreement earlier this year, making it apply to the length of the border as opposed to only at formal crossings. This followed an influx of people crossing to claim refugee status in Canada.

Canada is seen as having a swifter and more generous asylum system than the United States, especially for people making gender-based refugee claims.

Since the amendment, the number of asylum seekers crossing irregularly into Canada has plummeted even as the number of people intercepted crossing in the opposite direction stayed high.

Twice, Canadian federal courts have struck down the agreement and, twice, appeals courts have upheld it. This was the first time the Supreme Court had heard the case.

Refugee advocates in the case argued that the agreement violated asylum seekers' rights to life, liberty and security of the person as well as equal treatment under the law under Canada's Charter of Rights and Freedoms.

Canada's federal government defended the agreement, arguing that it is part of the country's administration of its asylum system, that not everyone turned back is detained, that their treatment does not breach rights in a way that "shocks the conscience" and that there are adequate safety valves in place.

The Canadian government also argued that suspending the agreement would result in a flood of asylum seekers crossing into Canada. Refugee advocates said there was no evidence of this

(Reporting by Anna Mehler Paperny; Editing by Mark Porter, Denny Thomas and Jonathan Oatis)