A journalists’ body has warned that new laws aimed at capping costs for defamation and privacy cases could badly hit local newspapers.

The Chartered Institute of Journalists has raised concerns about a government consultation on plans to introduce a cost-protection scheme, which would see people of “modest” means exempted from paying their opponent’s legal fees even if they lose a court case.

The CIoJ said the proposal, which was recommended by Lord Justice Leveson following his inquiry into press standards, could leave local newspapers struggling to pay legal bills even if they win cases.

Amanda Brodie, chairman of the CIoJ’s Professional Practices Board, said: “The prospect of a payout without the danger of having to pay costs even if they lose, will encourage many people to simply have a pop at their local papers, to see what they can get.

“This could spell ‘death by a thousand cuts’ for some of our papers, which are already struggling to survive in these harsh economic times.

“Taken together with a no-win-no-fee agreement, this means a litigant could potentially walk away from losing a defamation/privacy case, leaving the innocent newspaper to pick up a hefty legal bill. A large bill of this type, or a succession of smaller vexatious claims, could put some local papers out of business all together.”