Green anarchists Helen Steel and Dave Morris claimed another partial victory in their 10-year battle against fast food giant McDonald's with three Court of Appeal judges yesterday reducing their damages and reversing two verdicts made in their two-and-a-half year libel trial that ended last year.

Lords Justices Pill, May and Keane upheld most of the original verdicts, which were in McDonald's favour, but said Ms Steel and Mr Morris, who represented themselves throughout the trial and the appeal, had been correct to argue that 'if one eats enough McDonald's food, one's diet may well become high in fat, with the very real risk of heart disease'. This was one of the key points in the leaflet distributed by the small anarchist group, London Greenpeace, in 1986 which led to England's longest civil case. The judges said the ruling 'must have a serious effect on [McDonald's] trading reputation since it goes to the very business in which they are engaged.'

They also had 'considerable sympathy' with, but were not persuaded by, the pair's argument that the leaflet meant 'there is a respectable (not cranky) body of medical opinion which links a junk food diet with a risk of cancer and heart disease'.

However, they ruled that it was fair comment to say McDonald's employees worldwide 'do badly in terms of pay and conditions'. The trial judge, Mr Justice Rodger Bell, had found McDonald's exploited children with their advertising, were responsible for animal cruelty and paid low wages in Britain.

The judges upheld the libel court's ruling that McDonald's was not responsible for rainforest destruction or Third World starvation and that it did not poison its customers. As a result of the appeal the judges reduced their £60,000 damages by £20,000, a technicality because both are unemployed and unable to pay, and it is believed McDonald's would not want to pursue them further and risk more bad PR.

The McLibel Two failed to persuade the judges that giant multinational corporations should not be able to sue their critics on public interest issues. They intend to appeal on this and other points to the House of Lords and then take the Government to the European Court of Human Rights if necessary.

Yesterday they were jubilant. 'The trial was a victory against almost impossible odds, and the appeal adds to that It shows oppressive laws can be made unworkable by public defiance. Throughout the case the distribution of leaflets has grown exponentially. That's the victory,' said Ms Steel.

McDonald's welcomed the Court of Appeal upholding most of the findings of the trial judge.

A spokesman added that the allegations on pay and working conditions were 'matters of comment rather than statement of fact and were not libellous'.