In the first case of its kind in France, the national health insurance fund (CPAM) in Saint-Nazaire had demanded 18.6m euros from BAT-Rothmans, Philip Morris, JTI-Reynolds and Altadis.

The fight against cancer has received a terrible blow Francis Caballero CPAM lawyer

The CPAM said it was the amount it had spent treating more than 1,000 people with smoking-related diseases.

But on Monday a Saint-Nazaire court threw out the case, saying the insurance fund did not have the right to take the action.

Lawyers for the fund attacked the decision.

"This is a heavy defeat. The regional funds are reduced to dirty pay-masters - managing the consequences of smoking without being able to make the industry responsible," said CPAM lawyer Francis Caballero.

"The fight against cancer has received a terrible blow."

No jurisdiction in Europe has so far allowed this kind of surrogate action against cigarette manufacturers BAT statement

The tobacco firms said the court's decision backed their belief that third parties should not be able to take them to court.

"It is interesting to note that no jurisdiction in Europe has so far allowed this kind of surrogate action against cigarette manufacturers," said BAT in a statement.

The case was originally brought in 1999 but has been delayed by procedural objections from the four companies.

The fund was also seeking 3.6m euros annually from the manufacturers to cover expenses for future treatment.

Other demands included clearer labelling about health risks, paying for cancer detection facilities and offering free treatment for those trying to give up.