CFAs a matter of economic life and death

In the good years the huge libel fees levied against news organisations under Conditional Fee Agreement rules may have been bearable.

But in the current climate – they have become a matter of economic life and death.

The same point was argued again and again at Press Gazette’s Media Law conference on Wednesday.

New research cited by lawyer David Hooper, of RPC, suggests that English libel costs are 140 times the European average.

And more evidence of the sheer ridiculousness of the current system came from Guardian editor Alan Rusbridger – who revealed that he has been landed with a bill for more than £800,000 from Carter Ruck for a libel complaint from Tesco which didn’t even go to trial.

Let’s be clear – that is £800,000 which won’t be paying for investigative journalism and which will have been extracted from Guardian editorial budgets.

It’s been taken out of the pockets of journalists and stuck in the wallets of lawyers.

Rusbridger revealed that these costs bore no relation to the size of the damages paid to Tesco – which we can assume were only a few thousand pounds.

The Guardian got its original story wrong in February last year when it alleged that Tesco had dodged £1bn of corporation tax. It later reported that the alleged tax avoidance involved £100m of stamp duty land tax.

The paper apologised twice for the error – first in May and then again in September.

This was never about money – but about correcting a mistake. Why couldn’t Tesco just have brokered an apology via the Guardian’s reader’s editor without all the costly litigation? Sheer corporate belligerence one suspects.

And let’s not forget that if the Tesco press office had answered The Guardian’s questions more transparently from the start of the investigation the whole row might have been averted.

This is only the latest example of the excesses of the CFA system which Press Gazette has been chronicling exhaustively since we launched are “Fair Play on CFA” with a front page story last April,  and long before that.

Other examples include that of the Mail on Sunday versus Martyn Jones MP. The paper claimed he swore at a Commons official – he denied it. The result: £5,000 in damages, libel costs of £520,000.

As Julian Pike, from Farrer, revealed at Wednesday’s conference – the potential financial penalty today for a publisher getting it wrong and losing a libel case at trial is £2.4m.

Those costs are: claimant’s legal costs of £750,000, a 100 per cent success fee under CFA for the claimant’s lawyers of another £750,000, the publisher’s own costs of £500,000 and a further £420,000 to pay the insurance premium which the claimant would have taken to protect themselves against losing.

With stakes that high – it is no surprise that publishers roll over, pay out and apologise if there is even the faintest chance that they might lose the case.

If you add to this the fact that libel juries almost never find in favour of publishers – and you begin to see why journalists feel the odds are so loaded against them.

That 100 per cent success fee “uplift” is probably the most controversial aspect of the CFA system.

It assumes that the likes of Carter Ruck will lose as many no win, no fee cases as they win – so it means they get paid double for the victories.

The bizarre thing about this is that claimant lawyers win the vast majority libel cases they take.

Press Gazette tries to cover every cough and spit of what goes on in the libel courts.  Over the last six months we have reported on 50 major libel or privacy actions against publishers – I can find only two that were successfully defended.

At Wednesday’s conference, head lawyer at the Daily Mail Harvey Kass put a lawyer from Carter Ruck on the spot asking him how many media CFA cases the firm had lost.

The suspicion is that the likes of Carter Ruck, Schillings, Harbottle and Lewis and the rest lose practically no CFA cases – making a mockery of the need for a success fee.

The assembled media lawyers and journalists at Wednesday’s conference couldn’t have made the CFA problem clearer to Justice Secretary Jack Straw – who was the keynote speaker.

And he gave the impression that the Government will take action over CFAs.

He needs to act fast before a news organisation is driven out of business by a crippling legal bill.

The solution has to be a system of low-cost arbitration allowing publications to settle complaints quickly without having a financial gun held to their heads.

The Government should be doing all it can to ensure that the costly and risky business of investigative journalism survives the current downturn.

And it can do this without spending a public penny by reforming CFAs.

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