Scotland's £1bn whisky industry yesterday welcomed tighter rules on the production and labelling of the spirit in the European Union, claiming they will bolster exports and protect jobs.

Members of the European Parliament approved an updated and clearer legal definition of whisky, designed to help distillers tackle labelling which they have criticised as unfair and misleading.

The rules state that whisky cannot be flavoured or sweetened. They also update the protection of the geographical indication "Scotch whisky" in line with World Trade Organisation rules.

Nick Soper, the Scotch Whisky Association's European affairs director, said: "Improved EU protection for the traditional way of making Scotch whisky is a significant step forward. It will be easier to protect Scotch from unfair practices, supporting export success and the jobs that depend on that continuing success."

Whisky and other spirits drinks have been defined in EU law since 1989, but a spokesman for the SWA said the old rules proved difficult to interpret and appeared to offer loopholes. The association has pursued a string of court cases to protect the Scotch whisky brand. An example included taking action against a French producer who added sugar to whisky to sweeten it and sold the resulting product as whisky.

The spokesman said that the industry will now look at how best to bring forward national rules on Scotch whisky branding and labelling to the European level. This process will include talks on protecting the Gaelic language version of Scotch whisky - uisge-beatha Albannach - as a distinctive brand.

Yesterday's vote on spirit drinks also has important implications for vodka producers, in that those making the spirit from more than just potatoes or cereals will in future have to identify the extra ingredients on the label. The decision affects about one-third of the UK's vodka production, which includes molasses in the mix.

The UK is the second-biggest producer of vodka in Europe and the new labelling requirement, if endorsed by ministers, would mostly affect supermarkets' own-label vodka and other budget brands made from sugar beet.

The compromise avoids a tougher demand from Polish and Scandinavian vodka producers that the drink should only be called "vodka" when made from potatoes and cereals.

Labour MEP Linda McAvan, who brokered the deal, explained: "Only vodka made from either potatoes or cereals can simply be called vodka.

"All other vodkas will have to be labelled - but all European vodka producers will be able to keep their products on the market."

The European Vodka Alliance welcomed the compromise, which allows vodka to be made from any agricultural raw material as long as manufacturers comply with the need to stipulate on the label all the raw materials other than potatoes or cereals.

EVA spokesman Chris Scott Wilson said: "The Alliance has supported this compromise from the start. We hope now that EU governments will endorse the European Parliament vote and that this issue can be resolved once and for all."

The compromise on vodka was welcomed by Diageo, Europe's biggest spirits company, whose chief executive Paul Walsh had described efforts by some countries to tighten the rules as "protectionism".

The deal will be put to EU ministers for a final vote at the end of the month.