The Tasmanian Government has dumped plans to change the law to allow corporations to sue for defamation in the face of public opposition and a lack of support from other states.

The Government had planned to break away from national defamation laws to give corporations with more than 10 employees the right to sue groups or individuals who made false or misleading claims about their products.

It was an election promise designed to protect the forest industry from damaging market campaigns by environmental groups.

But the move prompted a backlash from the legal sector which feared "forum shopping" where corporations from elsewhere would file suits in Tasmania.

Environmentalists claimed the proposed changes would allow companies to shut down criticism.

Attorney-General Vanessa Goodwin abandoned the proposed changes because they were not supported by other states.

"To change the law we need the support of all state and territory colleagues or we had to go it alone," she said.

"Obviously the Law Society raised the concerns around forum shopping and I think that's a legitimate concern and we obviously needed to factor that into our consideration."

The Attorney-General admitted the policy was based on the forest industry's wishes alone and she had not canvassed other stakeholders.

"We consulted in the main with the forest industry, this was a policy they wanted [and] that they had a strong need for because of the false and misleading campaigns being run against Tasmanian businesses," Ms Goodwin said.

Law Society of Tasmania president Matthew Verney welcomed the government backflip.

Sorry, this video has expired Defamation laws ditched ( Annah Fromberg )

"It would've probably caused an outcome of limiting the ability for people to quite properly raise concerns about the activities of actions of companies, that's where the free speech argument comes into it," he said.

"So the Government has obviously listened to those concerns."

Mr Verney said it could have been a retrograde step.

"It is only relatively recently that the uniform laws were introduced all around the country, so for one state to go it alone and have laws different to the rest of the country poses problems such as the possibility of forum shopping," he said.

"So it could have resulted in some companies suing in Tasmania for defamation, which might have occurred online elsewhere.

"For companies engaged in businesses across state borders ... having to deal with different laws in different states would have been a complexity that would have been unwelcome."

A victory for free speech, says activist

Environmental activist Jenny Weber described the backdown as an enormous relief.

"It's a victory for free speech and it's vindication for the campaign that we ran around the company [Ta Ann]," she said.

"Along with Markets for Change I did travel to Japan and I did let the customers of Ta Ann know they were buying controversial timber.

"This was something that was brought up as something we should be pursued for under defamation and it's not.

"This is a great move for freedom of speech and a great move for environmental advocates who have every right to stand up to defend the environment."

The timber company at the centre of proposed changes to defamation laws said it supported the Government's decision to scrap the plan.

Ta Ann Tasmania's executive director Evan Rolley said the Government did not canvass the idea with the company before releasing its policy.

"The company wasn't consulted specifically about new legislation but from our point of view we're certainly very positive about the decision the Attorney-General's made, we understand the Government's thinking," he said.

The company's general manager Robert Yong said the decision made good sense and would be well understood in the marketplace.

Mr Yong said Ta Ann had always supported free speech and the right of people to fairly put different points of view.

"Our focus as a company over the last three years has been on developing new products and new markets," Mr Yong said.

But not everyone in the forest industry is happy.

Sorry, this video has expired Attorney-General admits no appetite for law change ( Michael Atkin )

The Forest Industries Association's Terry Edwards said he was concerned about the industry's reputation being besmirched in its markets.

"We are a bit disappointed, there's no doubt about that," he said.

Opposition Leader Bryan Green said the Government was abandoning its agenda in light of Upper House and community rejection.

"They tried for their protest laws, mandatory sentencing associated with that, that was thrown out by the Upper House," he said.

"They tried to get rid of the industrial relations commission's powers, that was thrown out by the Upper House in Tasmania.

"If you look at it, this Government, in a year, has effectively lost its agenda."

Last year, Tasmania's Upper House forced changes to the Government's anti-protest laws removing a bid for mandatory jail for repeat offenders.