No-win, no-fee libel law is a real danger to press freedom

It is recognised across the globe that Britain has the most oppressive libel law in the developed world. Indeed, that is why people from other countries are only too happy to use our courts, rather than their own, to pursue legal actions. Libel tourism, as it is known, is the most obvious manifestation of the fact that our laws place severe limits on press freedom compared with other countries.

Before I go further, I must stress that I believe individuals must have a way to protect their reputations and, incidentally, also their privacy. I am not in favour of ditching libel law in its entirety.

But it is clear that the balance between freedom of expression and the right to reputation has gradually swung too far towards the latter. To counter this lack of balance, newspaper lawyers have asked the Government to consider several urgent reforms, such as the introduction of a single publication rule for internet publication, the removal of the automatic right to a jury trial and some limitations to restrict large corporations and companies from being able to sue for libel.

These would be important changes, and I support them. There is a further reform, however, that I believe is crucial to restoring the rights of reporters to investigate and commentators to write without the fear of being sued - a restriction on the use of conditional fee agreements (CFAs). In common parlance, they are known as no-win, no-fee agreements and I admit that I have changed my mind about them because, when they were originally introduced in 1995, I believed they offered people who would not normally have the funds to pursue court actions the chance for redress.

In principle, they were a good idea because legal aid was not available for libel actions. CFAs enable solicitors to offer their services - to, supposedly, less well-off people - on the basis that if the case is lost, the client would not have to pay.

If they win, solicitors are compensated for having taken the risk by claiming a success fee above their normal costs, which can literally double their money. In addition, once the legal process is under way, clients have been able to obtain after-the-event insurance (ATE), though they are not required to pay any premiums until the conclusion of the case, and the money is only payable on success.

In practice, the system has not worked out as planned, nor as I expected.

First, the well-to-do, including highly paid celebrities, have been regular beneficiaries of CFAs.

Second, the combination of success fees for solicitors and the rising costs of ATE have proved to be a potent mixture, sending costs into the stratosphere even though the damages involved in most actions are usually relatively small. The result has been a direct and chilling effect on freedom of expression. Without putting myself into legal jeopardy, it is clear that solicitors acting for some claimants are able to pressure newspapers and magazines into settling actions in order to avoid the likelihood of racking up huge costs. As one media lawyer told me: "It is nothing but a form of blackmail."

Many small publications, including regional and local papers and independent magazines, dare not contest a complaint funded under a CFA for fear of the consequences of high costs.

But there is a further twist to this sad state of affairs because the Government, after representations from publishers, editors and lawyers, decided that there was a need to cap costs in order to curb spiralling legal costs.

Its mistake, however, was in issuing new civil procedure rules, which took effect in April, that stated costs should be capped only in exceptional cases. As concerned media lawyers were quick to point out, this would be a retrograde step. How does one define "exceptional"? Anyway, surely the need is to curb costs in all libel cases involving CFAs?

It did not take long for the Government's "mistake" to become evident. Just days after the new rule came into effect, Mirror Group Newspapers sought to have the costs of an action capped. The company is being sued over a Sunday Mirror story about the relationship of the celebrity Jodie Marsh and her estranged husband, Matthew Peacock. He is using a CFA to sue for libel over allegations made in the article.

The Mirror argued that unless costs were capped, it could find itself liable for costs of £1 million, on the basis that the claimant might instruct two counsel and city lawyers.

For a case that was, essentially, an "uncomplicated squabble", that figure or even half of it was, it contended, simply unacceptable.

In dismissing the application, Mr Justice Eady ruled that it could not be defined as an exceptional case. His hands were therefore tied by the statutory rule.

He gave more than a hint that, if it had been up to him, he would have been strongly inclined to cap the costs. In his judgment, he observed: "There is no doubt that the costs of libel litigation generally, and the implications of CFAs in particular, are capable of exerting a significant chilling effect on freedom of expression."

That, of course, is my point and that of all editors. I have no wish to join the throng of Eady's journalistic critics, but I do wish he had made more of a song and dance about the iniquity of the Government's rule.

Costs must be capped as a prelude to the wholesale reform of the libel law.