Express Newspapers, the owner of the paper, has instructed lawyers to prepare an application for the Court of Appeal that could reopen the verdict reached 13 years ago, on the basis of fresh evidence.
If no agreement is reached on repayment for the demanded amount, legal experts expect the Daily Star to be granted leave to appeal. The sum consists of pounds 500,000 in damages, pounds 700,000 in costs, and 13 years' accrued interest.
Peter Hill, the newspaper's editor, said: "We are very serious about this. We have hired the best lawyers. They are going through all the evidence again. We are also considering information that has come to the Daily Star in the past two days from several sources. Some of this is very interesting.... If the jury had known Archer had persuaded his friend to lie for him they would have been far less likely to believe the rest of the evidence."
Lord Archer withdrew his candidacy for mayor of London on Saturday after he admitted asking Ted Francis, a friend, to provide him with a false alibi for an evening he was alleged to have spent with Monica Coghlan, a prostitute.
"A very big part of the (libel) case was the fact that Jeffrey Archer had a wonderful and ideal marriage. That is now beginning to look much less true," Mr Hill added.
The newspaper is said to have been approached by at least one former juror in Lord Archer's trial, saying he would have voted differently had he been aware of the plot to concoct an alibi. A fresh trial will lead to details of the allegations against Lord Archer being reopened. They include that he had sex with Ms Coghlan.
For William Hague, this brings the shuddering prospect of Tory sleaze dominating the headlines again, despite his recent attempts to draw a line under the subject.Reuse content