A bill before the French parliament that would enforce a 'three strikes' rule on internet users suspected of piracy has been defeated in a surprise turnaround.

The Creation and Internet law would have required the setting up of a government agency that would tell internet service providers (ISPs) to take action against suspected file sharers.

After a first offence the user would be warned by email, a second offence would elicit a written warning and on the third offence the user would be cut off.

The bill, which was approved by the Recording Industry Association of America and the ruling party led by French president Nicolas Sarkozy, had been expected to pass, but a last minute campaign by the Socialist Party and defections from Sarkozy's party led to the bill being voted down 21 to 15.

Critics of the bill included libertarian groups who pointed out that the law would be a nightmare for ISPs to enforce, since IP masking is relatively simple and many innocent internet users would be cut off without reason, leading to costly legal battles.

"It will, in any case, be completely impossible to apply," said Jeremie Zimmerman, co-ordinator of the Quadrature du Net, a Paris-based internet activist group that opposes the bill. "It is a bad response to a false problem. "

The bill will now be amended and a new vote is scheduled after Easter.

The role of ISPs as piracy enforcers is also coming to the fore in the new Anti-Counterfeiting Trade Agreement, which is under negotiation. One of the issues being considered is making ISPs legally liable for their customers' actions.

This could have a killing effect on smaller ISPs without the resources to perform deep packet inspection or deal with legal cases against them. Businesses too are concerned that it could lead to a potential security problem if their traffic is closely inspected.