President Sarkozy suffered an embarrassing setback in his efforts to curb illegal downloading when an opposition ploy led Parliament to reject a controversial new law that would cut off internet service to offenders.

The bill had already been passed by both houses in a first reading but the sudden arrival of Socialist MPs in a near-empty chamber led to a 21-15 vote defeat on the final vote in the National Assembly.

The Socialists claimed victory for the wide coalition of critics of the law, which would create the world's first state agency with the task of tracking down people who download copyrighted entertainment without paying. About one third of French internet users admit doing so.

The agency would send three warnings to internet customers whose line was being used for illicit downloading. If the use were to continue after that, they would be cut off for a period of one month to a year.

The Government said that it would retable the law after Easter, when it is certain that it will be passed. It also accused the Socialists of "hiding MPs and bringing them into the chamber once the vote has been called in order to distort the reality of a debate and a vote."

The rejection was embarrassing on two counts. The low turnout for the morning vote by members of Mr Sarkozy's Union for a Popular Movement (UMP) reflected the weakness of parliamenary procedures in France's presidential regime. It also testified to the lack of enthusiasm in the government camp for a law which is deemed by critics to be a breach of democracy and counterproductive.

At least two of Mr Sarkozy's MPs voted against the law, saying they did so because of a last-minute amendment. This would require internet users to continue paying for their service as part of an overall telephone and television package, even if their access to the web had been cut.

Jean-Marc Ayrault, the Socialists' parliamentary leader, called on the Government to abandon a law that was unpopular and unworkable. Roger Karoutchi, the Minister for Relations with Parliament, called the rejection a "blow against artistic creativity and a bad blow for French artists."

The international recording and film industry is strongly behind the French law and they hope that, when enacted, it will set an example for the United States and other countries in the battle to end illegal downloading. The draft law will now go back for another vote by each house before returning to the Assembly for a final vote. Assuming that MPs in Mr Sarkozy's absolute majority obey their party, the law would be expected to come into force.

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