For almost 25 years people have been able to claim damages against employers if diagnosed with pleural plaques – a thickening of the tissue around the lung caused by inhaling asbestos, which can be a forerunner to the painful and always fatal cancer mesothelioma.

Last year the House of Lords, sitting as the highest court in the country, ended that right and left thousands of sufferers worried that they faced a "ticking timebomb" with no hope of compensation.

But now senior Labour activist Jamie Hanley, a Leeds-based trades union lawyer, has persuaded the Government to review the Lords decision and potentially overhaul the law.

It is conducting a 12-week inquiry into pleural plaques, due to report on October 1, which is gathering evidence from those affected by the condition and the families of those who have died.

If it concludes that pleural plaque sufferers should be compensated, the Government has pledged to bring in new policy in its next General Election manifesto to ensure sufferers receive their payout.

That could pit it against the powerful Association of British Insurers (ABI), whose members are benefiting from an estimated £1.4bn because of the House of Lords decision which ruled the condition was not a disease, and did not justify legal claims.

Last night the ABI said it was opposed to the new move.

Mr Hanley secured the commitment after introducing an amendment at Labour's recent National Policy Forum, calling for the Government to reverse the Law Lords decision.

While he did not manage to secure that absolute commitment, following trade union pressure on Ministers it was agreed that either the Lords decision would be overturned or a compensation scheme would be set up.

Yesterday Mr Hanley said: "It must be right that people have the right to go to work and come home again unharmed. My clients have told me they feel that being diagnosed with pleural plaque is a ticking timebomb, and this is a serious issue that needs to be addressed.

"I believe the Law Lords gave got this wrong. I have no doubt that the Government wants to do the right thing for people with pleural plaque, and this decision guarantees action to compensate these victims providing it can be demonstrated that there is the basis for doing so."

Mesothelioma is the third-fastest increasing cancer in Britain, with 2,000 people now diagnosed each year, and is not likely to peak for another 10 to 15 years.

Doctors believe victims are 1,000 times more likely to suffer from mesothelioma it if they already have pleural plaques – though there is no medical proof yet that they develop into anything more harmful.

It is a particularly common disease in Armley, Leeds, where the JW Roberts factory, notorious for asbestos claims, was based until it closed in 1950.

Leeds West MP John Battle has long led a campaign to secure justice for victims of that factory, a campaign that has now been taken up by Rachel Reeves, the Labour candidate to succeed him when he retires at the next General Election.

She said: "This is an excellent step forward. It's a fantastic result for the people of Armley, and everyone suffering from this."

A spokeswoman for the Association of British Insurers, Kelly Ostler-Coyle, said: "Pleural plaques are symptomless, do not lead to an increase in other conditions and have no effect on health at all.

"Making pleural plaques compensatable could create certain precedents of people being compensated for exposure to asbestos alone and could result in further anxiety for people.

"We as an industry are committed to paying compensation for mesothelioma and other asbestos-related diseases as quickly as possible, but are opposed to any change in this law."