The judges ruled that the European Commission had acted illegally when it introduced a directive in 1998 to phase out all tobacco advertising and sponsorship by 2006.

The Commission had argued that it introduced the legislation as a way of harmonising different laws across the European Union.

It said the current system, where different member states had different laws, hindered free trade within the EU.

No unanimity

The BBC Europe correspondent, Angus Roxburgh, says it was done in this way because health legislation requires the unanimous backing of all member states - and Austria and Germany would have voted it down - whereas internal market laws can be passed by a qualified majority.

As it was, the ban was challenged by international tobacco companies and advertisers in Germany.

Advocate General Niall Fennelly, who advises the European Court in Luxembourg, said the law should be killed off or watered down, so that it only covered indirect forms of tobacco advertising.

In its ruling on Thursday, the court said that the Commission had acted "outside its competence" and that it would go against competition within the European Union.

Trying again

In the meantime, individual member states can introduce their own legislation banning tobacco advertising if they wish.

The UK Government has already re-asserted its intention to do so.

Health minister Yvette Cooper said: "We would like to implement a ban at European level because the UK is part of a European market but if that isn't going to be possible then we will implement a ban at UK level."

'Advertising kills'

Clive Bates, director of the UK pressure group Action on Smoking and Health (ASH) said a ban on tobacco advertising is important.

"People sometimes forget that lives are lost through tobacco advertising. It encourages adults to continue smoking and helps persuade kids to start.

He added: ""We hope that the European Commission will study the ruling and have a revised proposal on the table before Christmas.

"We genuinely need European legislation in this area - there are over half a million tobacco deaths a year in the EU and this is one measure that would help."

Professor McVie said: "This setback will result in the loss of thousands of lives and we look to the British Government to stand firm against the tobacco industry's wrecking tactics.

"This is an opportunity for the British Government to lead the way and introduce legislation which goes further than the EU Directive."

A spokesman for the British Medical Association said: "Effective action to curb this cynical and deadly industry is long overdue."

However, Forest, the smokers' rights pressure group, hailed the decision as "good news for all consumers."

"Tobacco is a legal product and consumers have a right to receive legitimate product information," said a spokesman.