( CNN ) -- A Brazilian court has ordered an immediate halt to construction of a controversial hydroelectric dam project in the Amazon . It 's the latest twist in a long-brewing battle between the Brazilian government and local indigenous communities over the Belo Monte dam . The government has backed the construction of what would be the world 's third-largest hydroelectric dam , while activists argue that it would displace thousands of local residents and damage the environment . In the most recent ruling , announced by Regional Federal Judge Souza Prudente to reporters , construction is ordered suspended until indigenous communities get a say on the matter before congress , court spokesman Jair Cardoso said . Injunctions blocking construction have been issued in the past , but the government has successfully overturned them . Congress approved the Belo Monte dam in 2005 and construction started in 2010 when then-President Luiz Inacio Lula da Silva signed a $ 17 billion contract with Norte Energia , the consortium chosen to build the dam . But lawmakers erred in not seeking input from the indigenous communities beforehand , the judge ruled . `` The legislation requires consultation ( by indigenous communities ) prior to a decision by congress ( on construction of the dam ) , and what we have is an attempt after the fact , '' Prudente told the state-run Agencia Brasil news agency . `` Congress made a mockery and acted as if it were in a dictatorship , putting the cart before the horse . '' Norte Energia had not received notification of the ruling as of Wednesday , and would not comment for the time being , spokeswoman Sarah Barros said . The company will be fined $ 250,000 daily if it does not comply . If and when it is completed , Belo Monte will be the third-largest dam in the world , after the Three Gorges dam in China and the Itaipu dam on the Brazil/Paraguay border . The dam , being built on the Xingu River , a tributary of the Amazon , will produce 11,000 megawatts and provide electricity for 23 million homes . According to Norte Energia , after environmental considerations the area to be flooded by the dam was reduced to 516 sq . km ( 200 sq . miles ) . Estimates of the number of people who will be displaced by the construction of the dam range from 19,000 to 40,000 . The judge also found fault with a previous regional federal court decision that assumed that the country 's supreme court had upheld the constitutionality of the legislation behind the dam construction , according to Agencia Brasil . The decision in question had been the opinion of a single judge . For matters of constitutionality , two-thirds of the high court judges would have to agree .
The Belo Monte Dam is a controversial project on the Xingu River . A judge ordered a halt to construction . The project can not proceed until indigenous communities join in on the project .