The sign on the door says it all, but the acrid smell and smoke wafting across the Private Cannabis Club in the Madrid dormitory town of Paracuellos de Jarama are proof that it lives up to its name. "This is the one place we can smoke in peace," said a punter at the bar, mixing tobacco and dried, shredded cannabis leaf in a long rolling paper.

The Private Cannabis Club, with its palmate green leaves stencilled on the walls and the club's name etched on to smoked windowpanes, is at the vanguard of a new movement of pro-cannabis campaigners in Spain. The members spotted a gap in Spain's drugs laws which, they say, makes the activities of private clubs like these entirely legal.

The spacious Paracuellos de Jarama club, in a former restaurant in a town overlooking Madrid's Barajas airport, is equipped with a bar, kitchen, billiard tables and TV screens. It is the most sophisticated of up to 40 cannabis clubs that have sprung up in garages and back rooms around Spain since campaigners worked out that laws making it illegal to consume in public did not apply to private, member-only, clubs.

"We've been open for two months and we already have 125 members," said the association's president, Pedro Álvaro Zamora. Those members pay €120 a year to belong and Zamora and his companions follow rules that seem similar to those of exclusive Mayfair clubs. A sign by the doorbell warns that only members are admitted and a committee vets new applicants, blackballing some. Alicia Méndez, a club official, said: "Potential members are interviewed and we do not accept everyone. Our members have to be responsible people, have the right profile."

Zamora said: "This is not Amsterdam, this is not a coffee shop. This is our association's club house and it is a private place. It is not open for everyone."

Spain does not have a law banning consumption in private and members claim it is safer to use the club than go out to parks and smoke in public. Zamora said: "The club recognises that cannabis is not good for everyone. We propose a responsible form of consumption. Not everyone should smoke. We know there are risks." Club members can bring their own cannabis or share in the club's own stock. They can even take some away as long as they sign for it and the cannabis is for personal consumption.

Although the club house, which is registered with the local authorities, is left alone by police, members can get into trouble if caught carrying cannabis. "It is illegal to buy, sell or transport, so you can be fined if caught with it on you." The club offers legal help to fined members.

Supplying the club is another problem, as dealing in cannabis is illegal.

"We are fighting for the legal right to grow it," said Zamora. The club applied for a medical licence to cultivate cannabis but was turned down. Then police raided its secret plantation and destroyed the plants. Zamora said they would challenge in court the right to destroy a plantation devoted to supplying a private club: "We are people who work and pay taxes. We are not delinquents."

Some judges have ordered police to give confiscated cannabis back to clubs. "They have told them to return it on the basis that there is no threat to public health."

Zamora stressed that the club's suppliers did not belong to the drugs underworld: "We don't go to the black market to buy. We know farmers who cultivate cannabis and can provide us."

The club also campaigns on laws. "Prohibition does not work. Cannabis has been consumed for centuries and will continue to be … for centuries. Prohibition creates an illegal market and all that brings with it. It's better to educate people than spend money on prohibition that fails."

• this article was amended on 4 January 2011. The original referred to Paraceullos de Jarama. This has been corrected.