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Quick reform of libel costs faces challenges

Legal changes aimed at cutting disproportionate costs in defamation cases are facing opposition from peers and claimant lawyers.

Earlier this month, Justice Secretary Jack Straw laid a Statutory Instrument before Parliament to cap success fees payable in ‘no win, no fee’ agreements (or conditional fee agreements, CFAs) in defamation cases.

If passed, it will limit success fees to a 10pc costs uplift instead of the current maximum of 100pc payable to the winning side. But the reform needs to be approved by both Houses of Parliament.

The existing costs regime has had a ‘chilling effect’ on freedom of expression as many publishers have settled libel and privacy claims even where there is an arguable defence, simply to avoid the risk of having to pay the claimant’s disproportionately inflated costs if the defence is ultimately unsuccessful (see previous law column).

Announcing the proposed reform after a fast-tracked consultation lasting four weeks, Mr Straw said the move was particularly important for “protecting the future of our regional media, who have small budgets but play a large role in our democracy”.

His proposal was welcomed by the media as a boost for free speech and vital support for the local press.

But claimants’ lawyers said that it would make CFAs in defamation cases “no longer economically viable”, thereby reducing access to justice for poorer people who could not afford to fund litigation themselves.

The reform was delayed in the House of Lords after the Merits of Statutory Instruments Committee, which scrutinises secondary legislation, asked the House to consider whether the 10pc cap “swings the pendulum too far the other way, reducing poorer clients’ ability to challenge misleading published information”.

And former Commons Speaker, Lord Martin, has tabled a ‘motion of regret’ calling for more consultation on the proposed costs reform.

His personal intervention is controversial since on his instructions as speaker, the Commons spent more than £20,000 of taxpayers’ money hiring claimant libel lawyers to deal with media coverage that he claimed questioned his impartiality.

He also led a High Court battle to prevent details of MPs’ expenses being released to the media under the Freedom of Information Act.

In addition, a group of lawyers who act mainly for claimants has written to Jack Straw, threatening to issue judicial review proceedings over his fast-track decision.

The group, Lawyers for Media Standards, says the four-week consultation period was too short and that the decision had effectively already been taken before consultation began.

It also claims the decision to limit success fees to 10pc was based on inadequate and irrelevant information.

The Ministry of Justice has made clear it is trying to ensure the proposed Conditional Fee Agreements (Amendment) Order 2010 gains the required approval before the looming parliamentary recess.

But with challenges appearing on a number of fronts, there is now a degree of uncertainty over the implementation of the proposed 10pc cap on ‘no win, no fee’ success fees.

  • Solicitor Nigel Hanson is a member of Foot Anstey’s media team.
    To contact Nigel telephone 0800 0731 411 or e-mail nigel.hanson@footanstey.com or visit www.footanstey.com.