In a judgment that lawyers predict will usher in a new era of journalism, five law lords unanimously ruled in favour of a public interest defence that brings English law close to the freedom enjoyed by US media.

Journalists will be able to publish material if they act responsibly and in the public interest, and be free from the risk of libel damages, even if allegations later prove untrue.

The judges, who constitute Britain’s highest court, said that the media were entitled to publish defamatory allegations as part of its duty of neutral reporting, or if it believed them to be of substance, and to raise matters of public interest.

The ruling came in an appeal by The Wall Street Journal Europe against a High Court decision, backed by the Court of Appeal, that it should pay £40,000 damages to Mohammad Jameel, a billionaire Saudi car dealer, whose family owns Harwell Motors in Oxford.

The story, published in February 2002, said that bank accounts associated with a number of prominent Saudi citizens, including Mr Jameel’s family and their businesses, had been monitored by the Saudi Government at the request of United States authorities to ensure that no money was provided intentionally or knowingly to support terrorists. The ruling clarifies and simplifies the right of the media to plead the “Reynolds defence” to libel claims, namely that what they published was in the public interest.

Lord Hoffmann, giving the lead judgment, said that the article was a perfect example of journalism for which the public interest defence should be available. It was for judges to apply the public interest test, but the article in the Journal easily passed that test, he said.

Its thrust was to inform the public that the Saudis were co-operating with the US Treasury. “It was a serious contribution in measured tone to a subject of very considerable importance.”

It could not be proved true because the existence of covert surveillance would be impossible to prove by evidence in open court. But that did not mean it did not happen.

The newspaper was entitled to report even serious defamations against individuals, so long as they “made a real contribution to the public interest element in the article”.

Lord Hoffmann also said that judges, with “leisure and hindsight”, should not second-guess editorial decisions made in busy newsrooms. “That would make the publication of articles which are . . . in the public interest too risky and would discourage investigative reporting,” he added.

The key test was whether a media organisation or newspaper acted fairly and responsibly in gathering and publishing the information. If the reporter and editor did so, and the information was of public importance, then the fact that it contained relevant but defamatory allegations against prominent people would not permit them to recover libel damages.

Lord Bingham of Cornhill, the senior law lord, Lord Hope of Craighead, Lord Scott of Foscote and Baroness Hale of Richmond agreed. Lady Hale said: “We need more such serious journalism in this country and our defamation law should encourage rather than discourage it.”

Geoffrey Robertson, QC, who argued the case for the paper, said the decision gave British media more freedom to publish newsworthy stories.

Caroline Kean, litigation partner at the media law firm Wiggin, said: “This ruling is extremely important because it makes clear it is not appropriate for ‘responsible journalism’ to be interpreted narrowly.”

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