Until now, many victims of mesothelioma - a cancer caused by exposure to asbestos fibres - have been unable to receive compensation from former employers because they have been unable to trace them or their insurers.
However the new legislation, which passed through the Lords this week, will allow compensation to those who were negligently exposed to asbestos but cannot trace the employer or the company's insurer through a scheme funded by a levy on current insurers.
The Bill will award 70 per cent compensation pay-outs to around 300 victims of diffuse mesothelioma every year.
But only those diagnosed on or after July 25 2012 are covered by the compensation scheme.
Work and Pensions Minister Lord Freud hailed the Bill as a "major step forward."
He said: "The issue of poor record-keeping in the industry has for too long prevented mesothelioma sufferers from receiving the compensatory payments due to them.
"This Bill represents substantial progress in rectifying this injustice."
But while campaigners welcome any compensation granted to some victims, they argue that the Bill doesn't go far enough.
In its current form the Bill excludes half of all asbestos victims - those suffering with asbestos-related lung cancer, asbestosis and pleural thickening.
Asbestos Victims Support Group Forum chairman Tony Whitston said that the mesothelioma sufferers and their families were "bitterly disappointed" at the insurers' refusal to pay 100 per cent compensation and to backdate those payments to at least February 2010.
He said: "The government should have forced insurers to accept full liability for the insurance premiums they wantonly destroyed.
"We are calling on Lord Freud to honour the commitment he gave in debate to look to increase payments at least up to 3 per cent of gross working premium, the figure that insurers say they can afford.
"This is the very least that should be done. We will not let up on our fight for 100 per cent justice as the Mesothelioma Bill continues its passage through Parliament, and thereafter with a new government, if necessary."
Ucatt general secretary Steve Murphy said: "It is deeply disappointing that the government has not listened to concerns and strengthened the Mesothelioma Bill.
"Hundreds of asbestos victims will be denied any compensation if this Bill is not changed."
He added: "The losers are people who have developed a fatal asbestos disease through absolutely no fault of their own and the winners are the insurance industry who this government appears to be in hock to."
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