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Ken Loach will take on Quentin Tarantino for the Palme d'Or at the Cannes film festival next month, as a host of star directors arrive to do battle on the Riviera.

Both Tarantino and Loach have claimed the prize in previous years; their latest offerings, Inglourious Basterds and Looking for Eric, will compete against films from two more former winners, Lars von Trier and Jane Campion, in what has been billed as Cannes's “biggest heavyweight auteur smackdown” in recent years.

Three films with strong British connections - Loach's Looking for Eric, along with Bright Star and Fish Tank - will also vie for the Palme d'Or, guaranteeing a big presence for the UK film industry after last year, when no British film made it into the main competition.

In a line-up dominated by European and Asian cinema, yet more directorial A-listers, including Ang Lee and Pedro Almodóvar, are among the 20 whose work has been shortlisted for Cannes' top prize.

The Imaginarium of Doctor Parnassus, the Terry Gilliam fantasy on which Heath Ledger was working at the time of his death last year, will also be screened at the festival, but outside the competition. Johnny Depp, Colin Farrell and Jude Law stepped in to split the unfilmed sections of Ledger's role after the actor, who won a posthumous Oscar for his portrayal of the Joker in The Dark Knight, died part-way through shooting.

There has been much talk of a more frugal 62nd Cannes festival this year as a result of “la crise”, with the normally lavish Vanity Fair ball being cancelled and even the official hairdresser scaling back his team of coiffeurs.

However, red carpet glamour is expected in the elegant forms of Penélope Cruz, who stars in Almodóvar's Broken Embraces, and Brad Pitt, who features in Tarantino's long-awaited Second World War action film Inglourious Basterds.

Tarantino, who won the Palme d'Or in 1994 for Pulp Fiction, is the only American director to feature on this year's 20-strong shortlist, which includes six Asian films but is dominated by Europe's 11.

He is up against a true veteran in Loach, 72, who has now made the list nine times and won in 2006 for The Wind that Shakes the Barley. This year he offers Looking for Eric, which stars Eric Cantona as himself and tells the story of a football-mad postman who seeks life lessons from the former Manchester United and France star.

Thierry Fremaux, artistic director of the festival, said as he unveiled the line-up: “All the great names of world cinema are here this year, and the old dogs have some fine new tricks in store.”

Asked about the lack of American output in the selection, which was chosen from 1,670 films from 120 countries, he suggested that last year's Hollywood writers' strike could have prevented many US directors finishing their projects in time for Cannes.

In their stead is a truly international list of directorial A-listers, including Lee with Taking Woodstock and Von Trier with Antichrist.

Jane Campion, the New Zealander who became the first woman to win the Palme d'Or, in 1993, for The Piano, will also be bidding for a second win, with Bright Star, about John Keats. Ben Whishaw, 28, who plays the poet, is part of a strong British contingent among the cast and crew. Both Bright Star and Fish Tank, the second feature film from the British writer/director Andrea Arnold, were partly funded with public money through the UK Film Council and the BBC.

John Woodward, the council's chief executive, said that yesterday's announcement continued a great year for British cinema after the Oscar triumphs of Danny Boyle and Kate Winslet: “British film is flying right now. This year's Cannes line-up shows that the British industry is delivering world-class cinema which complements the kind of commercial success that was recognised at the Oscars earlier this year.”

The festival will open on May 13. For the first time the curtain-raiser will be an animated feature, Up, from Pixar, the maker of Toy Story.

This year's jury will be led by Isabelle Huppert, the French actress who is herself a double winner of the festival's Best Actress prize, and will also include the British novelist and screenwriter Hanif Kureishi.

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