The music throbs from the floor through the soles of your feet. There are strobe lights and closed-circuit cameras. The doormen in suits listen to radio ear-pieces, waiting for trouble.

This is any Dublin night-club on any night. Someone approaches a young man dressed in the clubbing uniform of T-shirt and canvas shoes, bottled lager in hand. An offer is made and accepted.

The buyer might follow the supplier into a dark corner and hand over a folded note. But instead of snorting, smoking or swallowing the substance, the man slips it into a plastic evidence bag.

Somewhere outside the club a uniformed garda stops the supplier. The banknote used to buy the drug is recovered. The seller is told he is being arrested on suspicion of selling an illegal substance to an undercover garda. The powder, pills or lump of resin is sent to the forensic laboratory at Garda headquarters for analysis.

Up to 20 people have been arrested in these circumstances in the last three months, under Operation Nightcap. In some cases the dealers turned out to be selling "rips" or fakes.

The customers had been paying £10 or more for an Anadin with the factory logo scraped off, thinking it was a tablet of ecstasy or amphetamine.

A person who sells rips to a garda cannot be prosecuted, and the case is dropped. But if the substances prove to be illegal drugs, the supplier will face a charge in the District Court of possession with intent to supply.

It is believed that most of those charged are facing their first criminal case, so the possible sentence on conviction is likely to be lower than the six to nine months handed down to other small-time drug sellers.

The operation, which began three months ago co-ordinated by the Garda National Drugs Unit under the Dublin Assistant Commissioner, Mr Jim McHugh, is not just aimed at the sellers.

It is the third such undercover operation in the city. In two waves of Operation Cleanstreets, undercover gardai bought heroin from dealers and more than 120 people were prosecuted. The method was first used in the 1980s when the undercover officers were christened mockeys by those they stung. Now, as then, selling to a mockey means losing face for ever among fellow dealers and users.

The difference with Nightcap is that the venues where drugs have been sold are being warned to take control over their premises or gardai will apply to have their licences revoked.

Undercover gardai have bought drugs in 12 Dublin venues. The operation was set up in response to complaints from club patrons or from parents whose children have been sold drugs. Seven of the 12 venues have received written warnings. Evidence regarding the remaining five is being analysed and they are expected to be warned in coming weeks.

Club-owners have been putting in their own undercover security staff to observe what happens in the parts of the club where a bouncer in a suit or bomber jacket does not go.

Under the Licensing (Combating Drugs) Act of 1997, gardai must give the licence-holder warning that there is a "reasonable suspicion" that there was sale, supply or distribution of drugs on the premises. The pub or club is then given at least four weeks to "take whatever action is necessary to prevent such sale, supply or distribution."

If drugs are found being sold on the premises after such notice, a garda of inspector rank or higher can apply to the District Court for an order to have the licence revoked.

If a venue loses its licence under the 1997 Act, the licence-holder is barred from having a licence for five years and no licence can be granted on the premises itself for the same period.

The value of a premises without a licence will be a fraction of its previous value.

Licences can be withdrawn for permitting the sale of drugs or for not exercising "control which was reasonable in all circumstances" to prevent selling.

Club and pub managers and owners have said they were surprised to discover that drugs were being sold on the premises. Night-clubs by their nature are furtive places.

Two women going into the same cubicle in a toilet could be viewed as a possible drug transaction or just part of a girlie ritual.

Last summer the Licensed Vintners' Association (LVA) alerted its members to the Act and warned them of the penalties. The LVA chief executive, Mr Frank Fell, said the association, which represents 93 per cent of the licensed trade, "totally supports the Act."

It is intelligent legislation, he said. And the LVA has discussed with gardai and others what measures the licence-holders can take. There is no reason to believe that the sale of drugs is confined to Dublin venues. This week's crime statistics showed that 52 per cent of ecstasy offences were recorded in Kerry, Limerick and Cork, compared with just 20 per cent in Dublin.