A New York judge has approved a potential $200 billion (£105bn) class action lawsuit on behalf of tens of millions of smokers of light or low tar cigarettes who are seeking damages from a group of leading American tobacco companies.

The lawsuit, which could become the largest of its kind, was certified at a federal court in Brooklyn this morning. Class actions lawsuits, which seek damages on behalf of groups of individuals, must be certified by a judge before they are allowed to proceed.

Shares in tobacco companies fell sharply on the news, with the Dow Jones US Tobacco index down 4.6 per cent in afternoon trade.

The suit, which was filed in 2004, alleges that the tobacco industry defrauded smokers by making them think that light or low tar cigarettes were safer than regular cigarettes when they carry the same risks.

The suit, known as Schwab after the lead plaintiff Barbara Schwab, is seeking $200 billion in damages based on the amount of money the tobacco companies earned from the cigarettes.

Light or low tar cigarettes accounted for 85 per cent of US cigarette sales in 2002, the most recent year for which figures are available, according to Cohen, Milstein, Hausfeld & Toll, the lawyers representing the plaintiffs.

District Judge Jack Weinstein also ruled that the plaintiffs could sue several tobacco companies in the same case rather than having to launch separate proceedings. He set a trial date of January 22, 2007.

The tobacco companies, which are likely to seek an appeal of today’s decision, include Altria Group, Philip Morris, British American Tobacco and Loews.

In May 2005 a New York judge withdrew class action status on appeal for a similar case seeking damages from tobacco companies.

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