Experts have warned that internet firms could face a flood of libel claims in the wake of a landmark legal victory.

Dr Laurence Godfrey received damages and costs amounting to �250,000 after Demon Internet settled out-of-court after allegedly defamatory statements about him appeared in discussions on the internet.

Now experts warn the precedent of holding an Internet Service Provider (ISP) responsible for information accessed via its servers could lead to companies pulling the plug on websites rather than being dragged through the courts.

Nick Arnold, an information technology litigator from Tarlow Lyons, told BBC Breakfast News: "This will be the benchmark for all future cases."

He said it raised the issue of whether ISPs would be responsible for monitoring all the material trafficking through their system.

He added: "For the larger ones it is going to be almost impossible for them to do so without putting enormous resources into their infrastructure.

"There will also be problems over whether they are obliged to assess whether material is defamatory or not."

Other specialists and Demon Internet have called for legislation to give ISPs in Britain immunity from lawsuits concerning information over which they have little or no control.

Mark Stephens, a Dot.com lawyer for London-based Finers Stephens Innocent, said: "You have a situation which is analogous to BT being sued for libel because its telephone lines carry a defamatory conversation or recording.

"In America, ISPs have immunity over the content they provide access to and that must be the situation here.

"Otherwise, you are going to have a legal free-for-all with libel writs flying left, right and centre.

"It also signals a considerable risk to the freedom of the internet itself.

"Any company is going to err on the side of caution and take down any websites it provides and about which it receives complaints."