The Scottish Government must not prolong the legal battle following a defeat over Holyrood’s gender reform laws, former SNP leadership candidate Kate Forbes has warned.

First Minister Humza Yousaf claimed devolution was “fundamentally flawed” following the Court of Session’s ruling that the UK Government had acted lawfully in using a Section 35 order of the Scotland Act to block the Gender Recognition Reform (Scotland) Bill from gaining royal assent.

The legislation simplifies the process for transgender people to obtain a gender recognition certificate (GRC) and officially change their legally recognised sex.

The legal challenge cost the Scottish Government around £230,000 and ministers now have three weeks to decide whether they want to appeal against the decision at the Supreme Court.

In her ruling, Lady Haldane, who presided over two days of evidence in September, said the Scottish Government’s petition “fails”, dismissing arguments from Lord Advocate Dorothy Bain that Scottish Secretary Alister Jack launched the never-before-used power because of a policy disagreement.

She also agreed that reserved equality laws would be altered by the Scottish legislation because it would mean the GRC would be altered by removing the gender dysphoria diagnosis.

Mr Yousaf said on Friday he would take time to consider the judgment, however his leadership rival has warned that appealing against the decision could “exacerbate” divisions rather than heal them.

Instead, she urged the First Minister to work with MSPs to develop a “reformed” Bill that works for campaigners on both sides of the argument.

Writing on X, formerly Twitter, the former finance secretary said: “I previously argued that Scot Gov shouldn’t contest S35 unless there was a v high chance of success. A loss for Scot Gov would obvs absorb public funds but could embolden future UK Govs to interfere in devolution, which no party of independence wishes to see.”

The Skye, Lochaber and Badenoch MSP added: “Most worrying, it has created a period of great uncertainty and fear for trans people and women and girls, deepening already bitter divisions. All politicians must heal divisions not exacerbate them. That means listening.

“The priority should now be to give security and clarity to trans people & to women & girls. I urge the Gov not to prolong the legal battle further. I have confidence in our citizens & democratic processes to safeguard rights of everybody in a reformed Bill if we listen to all.”

During the leadership contest earlier this year, which saw Ms Forbes come a close second to Mr Yousaf, the gender reforms were a significant part of the debate.

Ms Forbes has been a strong critic of the proposals in their current form and she said she would not have voted for the Bill if she had been in parliament instead of on maternity leave during the crucial vote.