The success fees which lawyers working on no-win, no-fee conditional fee agreements (CFAs) in defamation cases should be cut from 100 per cent to just 10 per cent, Justice Secretary Jack Straw announced today.
The proposal, the latest stage in the Ministry of Justice's programme aimed at ensuring that costs in publication proceedings are reasonable and proportionate, was put out for consultation today.
It is thought that action could be taken through a statutory instrument by May.
Mr Straw's announcement comes hot on the heels of the publication last week of the review of costs in civil litigation in which Sir Rupert Jackson, who sits in the Court of Appeal as Lord Justice Jackson, recommended ending the regime under which success fees for lawyers suing newspapers for defamation and privacy on CFAs are paid by the losing defendant.
Instead, he said, damages should be increased by 10% so that the claimants could pay their lawyers' success fees from the amounts they recovered.
Media organisations have protested since CFAs and success fees came into force in 2000 that they have pushed costs to disproportionate levels, far beyond the value of a case.
The effect, they say, has been worsened because successful claimants have also been able to claim the premiums for after the event (ATE) insurance, which they take out to protect themselves against the risk of being ordered to pay a defendant's costs in the event that they lose.
In some cases which get to trial the successful claimants' lawyers have claimed success fees of 100% of their normal rate from the losing defendant, effectively doubling their charges.
Media organisation say this has had a seriously chilling effect on newspapers and news organisations, leading to a drop in the amount of investigative journalism they undertake, with editors deciding against publishing stories in the public interest because of the risk of facing huge costs bills.
Announcing the consultation, Mr Straw said: "Freedom of expression and investigative journalism are fundamental protections to the democracy of this country.
"I have recently announced a review of the law of libel, with a working group to consider whether the law of libel, including the law relating to libel tourism, in England and Wales needs reform, and if so to make recommendations as to solutions.
"I am, however, aware of the growing concern about the high legal costs in defamation and some other publication cases brought under CFAs.
"Lawyers need to recover their costs and be rewarded for their efforts and the risks they undertake when providing people with access to justice in 'no win no fee' cases.
"But evidence suggests that the regular doubling of fees that currently takes place is simply not justified and the balance of costs between claimant and defendant needs to be reconsidered.
"Sir Rupert Jackson's comprehensive review of costs in the civil courts, which was published last week, proposed a broad range of recommendations for reform.
"I welcome that substantial and detailed report and I look forward to considering the proposals in detail. But the case for an urgent interim measure for dealing with success fees in defamation cases has become clear; that is why I am publishing this important consultation paper today."
At present, lawyers working on CFAs may claim success fees of up to 100% of their normal fees when they win a case.
The success fee and the ATE insurance premiums - in excess of £60,000 for cover amounting to only £100,000 - are also payable by the losing party, although Sir Rupert also recommended that this should be stopped.
Success fees are intended to enable lawyers representing people on CFAs to bear the cost of cases they lose.
But a Ministry of Justice spokesman said: "The success rate of defamation actions does not justify such a generous success fee."
In October the Ministry of Justice introduced a series of reforms intended to ensure that costs in some publication proceedings, including defamation cases, are kept at reasonable and proportionate levels.
* Mandatory early notice of ATE insurance, so a defendant would have a clear idea of the potential cost of premiums he would have to pay if he lost a case;
* A 42-day cooling-off period during which, if the defendant admits liability and makes an offer leading to a settlement, the ATE insurance premium cannot be reclaimed from the defendant;
* A mandatory cost-budgeting pilot scheme for defamation proceedings, aimed at ensuring that costs are proportionate and within the agreed budget, with close judicial supervision.
The consultation paper launched by Mr Straw today, entitled Controlling Costs in Defamation Proceedings - Reducing Conditional Fee Agreement Success fees, is available on the Ministry of Justice website at www.justice.gov.uk/consultations/costs-defamation-proceedings-consultation.htm .Reuse content