The European Council's health and consumer affairs group (EPSCO) - with representatives from all 25 EU nations - unanimously agreed to stand by controversial articles of the proposed law, including nutrient profiling and the prior approval of health claims.
Nutrient profiling (article 4) would ban foods high in salt, sugar and fat from carrying a health claim, a requirement considered the cornerstone of the health claims legislation by consumer groups and European governments keen to act on the rising numbers of obese across the region.
The Commission's 2003 proposal also wants all health claims to be approved by the European Food Safety Authority (EFSA) before they reach the market (article 12).
Both these articles would be removed under changes voted by the European Parliament at the end of May.
But the Council's decision, called the final common position, means the law must go through a second reading in Parliament, expected to take place in early 2006.
"The divisions between the two institutions have been laid bare, illustrating the amount of work still to be done by industry if it does not want to submit costly dossiers of evidence for all health claims," commented industry lobbyist Chris Whitehouse on Friday's decision.
Compromise between the Council, keen to stand by consumer interests, and the parliament, voting to make health claims an opportunity for industry innovation, will be essential to bring the law into force.
If agreement cannot be reached after the second reading then both institutions, along with the Commission, will have to go into conciliation to thrash out a deal.
EU health commissioner Markos Kyprianou, welcoming the council's position in a statement released on Friday, revealed how difficult this conciliation could be.
"It is not in the interests of consumers to allow food products to promote claims about their nutritional and health benefits if such claims are false or misleading and obscure the overall nutritional value of the food," he said.
He added that the proposal also "enables those companies whose products offer genuine health and nutritional advantages to EU citizens to compete fairly in the internal market."
According to the Commission, poor nutrition is among the main causes of many avoidable non-communicable chronic diseases and obesity in Europe. Studies have shown that the prevalence of obesity amongst children is growing at a rate of 25 per cent in some regions of the EU, and that about 400,000 children are becoming obese or overweight every year.