People convicted of video piracy or of selling pornographic videos to children for the last 25 years could challenge their convictions as the 1984 law regulating the video industry was never enacted, it emerged last night.

Police are to be told to stop bringing any prosecutions until the government brings in emergency legislation to re-enact the 1984 Video Recordings Act. Until they do, people will be able to sell videos – including violent and pornographic ones – to under-18s without fear of prosecution.

The government admitted yesterday the act was not properly enacted 25 years ago. Officials in the Home Office had failed to notify the European commission of the existence of the legislation, as they were required to do under an EU directive.

Barbara Follett, minister for culture media and sport, said last night: "Unfortunately, the discovery of this omission means that, a quarter of a century later, the video recordings act is no longer enforceable against individuals in UK courts."

In a letter to representatives of the video industry, Follett said: "As the then British government did not notify the European commission of the VRA's classification and labelling requirements, they cannot now be enforced against individuals in UK courts."

The act was passed when Leon Brittan was Conservative home secretary and then amended under Michael Howard's period at the Home Office.

Don Foster, the Liberal Democrat culture, media and sport spokesman, said: "The Conservatives' incompetence when they were in government has made laws designed to prevent video piracy and protect children from harmful DVDs unenforceable and thrown film censorship into chaos.

"This must be a massive embarrassment to the Tories, especially as David Cameron was the special adviser to the home secretary in 1993 when the law was amended."

A Home Office spokesman said it was likely the error had occurred because the European directive was new at the time the act was passed.

The error went unnoticed when the laws were amended in 1993 and 1994. The technicality means the act is unenforceable and urgent action is now under way to notify Europe and re-enact the legislation. However, the process will take at least three months and is unlikely to be rectified before the New Year.

Meanwhile, no one can be prosecuted under the laws and the Department for Culture, Media and Sport has written to relevant bodies telling them not to pursue prosecutions.

The mistake was discovered only as the culture department was preparing to establish a new video games classification system. There were 1,659 successful prosecutions under the act between 1995 and 2007 – the only figures available – and lawyers for the department insist those convictions will remain safe.

The department said it had received legal advice that people who had been prosecuted and convicted would be unable to overturn their convictions or seek compensation. However, it is possible that those who were convicted may mount legal challenges as they were, in effect, prosecuted under an act that should not have been enforced.

Lavinia Carey, director-general of the British Video Association, which represents 90% of the industry, said: "What a ludicrous situation to find ourselves in after all this time."