Spain's controversial new film law took a major step forward on Friday after being approved by the Council of Ministers.

The legislation, now expected to come into force by the end of the year after being pushed through Parliament as a matter of urgency, is intended to improve distribution and boost young talent, independent producers and new technologies.

However, it has been bitterly contested by exhibitors and television operators as well as some actors and even other ministries.

Friday's version included a major climbdown on the part of the Socialist government, which abandoned an original provision to increase the television industry's compulsory investment in European and Spanish cinema - estimated at more than $1bn (Euros 800m) between 1999 and 2006 - from 5% of revenue to 6%.

The European Court of Justice is currently investigating whether any level of enforced investment is legal.

The draft law also boosts Spain's main government subsidy fund for the sector, maintains producers' tax breaks at 18% until 2011 and increases tax write-offs for financial investors as co-producers from 5% to 18%.

Local exhibitor's federation FECE said exhibitors' requests had been completely ignored, for example capping studio rentals to combat Hollywood domination and discontinuing an 'anti-competitive' local/ international screening quota - although this will now be counted by sessions, rather than days.

A FECE statement said: 'No other European Union country forces exhibitors to show films of their own nationality.

'The quota is an enforced loss-making investment for cinemas, which has seen us lose Euros 1 billion in the last six years with no compensation.

'Meanwhile producers can get up to five kinds of direct and indirect subsidies.'

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