Campaigners reacted with anger today to a ruling that residents of private care homes are not covered by human rights law.

The decision, which could affect up to 300,000 residents in the UK, came in the case of an 83-year-old Alzheimer's patient whose lawyers argued that her threatened eviction from a private home would violate her right to family life.

The House of Lords, by a 3-2 majority, rejected the argument the home was carrying out a public function by caring for people referred by a council, and was therefore bound by the Human Rights Act.

Kate Jopling, head of public affairs at Help the Aged, said today's decision was "a sickening blow to older people and their families".

"The vast majority of vulnerable older people receive their care from the private or voluntary sectors. Today they remain without protection from abuses of their most basic human rights," she said.

The charity called on the government to rectify the situation with legislation to give elderly or vulnerable people in private care homes the same protection as those in council-run homes.

"The legal system has failed vulnerable older people. The government must not," Ms Jopling said.

The patient, identified only as YL, has lived at the home since January last year when she was placed there by her local authority, Birmingham council. The home, which cannot be named for legal reasons, is run by Southern Cross Healthcare, which wants to remove the woman because of disagreements with her relatives.

The central issue in the case was whether the act should protect residents who have been placed in the care of private sector providers but funded by local authorities.

Civil rights group Liberty, was represented in the case. Its lawyer, Anna Fairclough, said they were very disappointed by the decision.

"It is open to parliament to be the last court of human rights and enact specific care home legislation to prevent local authorities from contracting out of dignity for Britain's elderly," she said.

Baroness Ashton, the minister for human rights, said she too was disappointed by the ruling and planned to sit down with all interested parties in the case next week, to discuss their options.

Andrew Dismore, MP, said the decision was contrary to what parliament intended when the Human Rights Act was passed. He urged the government to back his private members bill, the human rights (meaning of public authority) bill, to correct the position - or to urgently promote its own legislation.

Sir Bert Massie, the chairman of the Disability Rights Commission, described the current position as untenable. "Many local authorities rely on care placements in the private sector. This ruling will cement a fundamental inequality in disabled and older people's rights - those in care homes run by local councils have legal rights to human dignity, those 'contracted out' will not," he said.

The British Institute of Human Rights accused the House of Lords of undermining the fabric of human rights protection in the UK.

"We know only too well that horrible human rights abuses occur in care home settings. This case was an opportunity for the House of Lords to say once and for all that private and voluntary sector care homes 'stepping into the shoes' of the state have a responsibility to protect their residents against human rights abuses. The House of Lords failed in this task," a spokesperson said. "The responsibility now clearly lies with government to remedy this loophole."'

A spokesperson for Southern Cross Healthcare said they were delighted by the ruling.

"The fact that the House of Lords has decided that private care providers should not be public bodies for the purposes of the Human Rights Act does not in any way deflect from our determination to ensure that the privacy, dignity and safety of all our service users is protected at all times and Southern Cross as a company remains committed to that aim."