Lords back voluntary libel arbitration scheme with threat of exemplary damages against non-members
Legislation will go back to the Commons
Bid to clear 'logjam' over implementing Leveson proposals
Work could stop now industry bid to create new independent regulator
Lords pass separate amendment making it harder for companies to seek libel damages
The Government suffered a massive defeat in the House of Lords last night as peers backed plans to incorporate a version of some of the Leveson proposals into law.
Lord Black of Brentwood, who has been co-ordinating discussion among press owners, has warned that move could lead to the industry halting its negotiations towards creating a new independent regulator.
Peers supported by 272 votes to 141, a majority of 131, an amendment to the Defamation Bill that would introduce a low-cost arbitration service, as recommended by Lord Justice Leveson in his report into the press.
The move was put forward by Labour peers Lord Puttnam, a film producer, and former attorney general Baroness Scotland of Asthal, Tory former lord chancellor Lord Mackay of Clashfern and former Commons speaker Baroness Boothroyd, an independent crossbench peer.
They argued the move was necessary as a result of slow progress in putting into effect the proposals contained in the Leveson report.
The defeat came despite Justice minister Lord McNally announcing that a draft Royal Charter that could be used instead of legislation to underpin press regulation will be published next week.
Under the proposals, an independent body would have to certify the new arbitration system and while it would be voluntary, newspapers that did not join up could be punished by courts awarding greater damages and costs and defamation cases.
Before becoming law the proposals would have to be agreed by MPs when the legislation returns to the House of Commons after completing its passage through the Lords later this month.
Introducing his move, Lord Puttnam said: "These amendments offer us the opportunity to break the logjam that appears to have afflicted both the talks between newspapers and the Government and the talks between the three main political parties themselves.
"At the very minimum we would have the opportunity to make justice in disputes with newspapers quick and affordable."
Labour spokesman Lord Stevenson of Balmacara called for the Government to have the "courage of their convictions".
He told peers: "We must act on Leveson's proposals for a substantial and lasting change. The amendments introduced by Lord Puttnam are a reflection of both the lack of confidence in, and frustration with, the current process of implementing the Leveson proposals."
He added: "They would, if passed, mark the beginning of a process to incorporate most of the Leveson proposals into statute. They send a very direct message to the Government - that the House wishes to see the Leveson proposals implemented."
Lord Stevenson said the amendments offered the Government the chance to "get back on track" with implementing the proposals.
He said: "I think agreeing these amendments is what the people of this country want and what the victims deserve."
Lord McNally, the leader of Liberal Democrats in the Lords, told peers: "The media has a long, long way to go before it rectifies the harm it has done to our body politic."
But he warned against passing the amendments, which he said would damage the talks on introducing the Leveson proposals.
He said: "There is a danger that passing these amendments today will be a diversion and not progress towards what I want to see and what the House wants to see."
Lord McNally agreed with Lord Stevenson that in cross party talks "there seems to be a certain lack of momentum in recent days, which makes this debate not unwelcome".
He said: "I am convinced that if it can be secured an approach agreed across party is the best way to do justice to Lord Justice Leveson's proposals and to ensure a new system of press regulation which can endure and secure real public confidence."
Urging peers not to vote in favour of the amendments, he said: "I would ask you to allow those cross-party talks to reach their full and considered conclusion rather than bring legislative proposals before this House today."
The Archbishop of York, Dr John Sentamu, backed the amendments as a way of helping to restore "trust" in the media.
He added: "Do we think in this defamation area that only the rich should have redress? The press ought to be welcoming it because costs may be far, far less than going through a very elaborate court case."
Tory former Cabinet minister Lord Fowler backed Lord Puttnam's move as a "building block in implementing Leveson - a kind of stalking horse".
He said that since the Leveson report last year "some newspapers sensing a weakness of intent have continued to attack Leveson in the most lurid and extreme manner and often quite inaccurately".
"We hear mutterings about a Royal Charter but there has been no attempt to engage the public in this discussion or for that matter very many politicians outside a magic circle have been engaged, while the press themselves show an almost total lack of inquisitiveness about what is going on," he said.
"In the circumstances of this news blackout, with no assurance that the Government intends to act in a sensible manner, I can see no objection whatsoever to setting out for the Commons a suggestion on one path that we should go. I think the amendments are good for the press and good for the public."
But Tory Lord Black of Brentwood, chairman of the Press Standards Board of Finance and executive director of Telegraph Media Group, said the amendments were "unnecessary" and were "counter productive".
He said about the Leveson proposals that there was "no question of kicking this into the long grass" and that he was working with chairman of the Press Complaints Commission Lord Hunt of Wirral and newspapers on setting up a new regulation system.
He said the arbitration service would be a "very important part" of a new regulation system but it was important it was not a "new cash cow for claims farmers".
"What would stop it (work on the new scheme) dead in its tracks is any attempt to establish a scheme by statute," he said. "There would be little point a regulator setting up a scheme and industry funding it if it was simply to compete with other bodies.
"If this amendment passed today, work would be likely to stop tomorrow because of the potential of what is in effect regulatory chaos."
Tory Lord Hunt told peers that he would come up with a tough independent regulatory system backed by all newspapers by the middle of the year.
"It is very important that this House should not start imposing detailed prescriptive clauses that are not in Lord Justice Leveson's report. His wish was to see an independent regulatory body established," he said.
Lady Boothroyd said the amendments would help the press "re-establish itself as that trusted investigator that it once was".
"This Government and all previous governments over the last 60 years should have taken action but they never did and yet after seven Royal Commissions and four parliamentary inquiries and a lot of public money, it will not longer suffice to be told that there will be an announcement tomorrow," she said.
"It reminds me of a very famous line in Gone with the Wind - 'tomorrow is another day'. We have run out of tomorrows; tomorrow never comes. It is today that we must take action."
Lady Scotland told peers: "We have to grasp this opportunity if we want to see change.
"We are faced with a choice. The people of this country have been thirsting for a change. Do we slake that thirst or do we say, no, you must wait even longer."
But Liberal Democrat Lord Lester of Herne Hill, a leading QC, argued the amendments could be in contravention of the European Convention on Human Rights and could result in "complex legal disputes".
Second amendment means companies must show 'substantial financial loss'
Later, the Government was defeated again when peers backed an Opposition amendment raising the bar for defamation cases, so that companies would have to show substantial financial loss before being able to bring a claim.
The amendment was carried by 201 votes to 193.
Labour spokeswoman Baroness Hayter of Kentish Town said the move came in response to the "chilling factor" of threatened action by major corporations trying to silence critics.
Peers were concerned about the ability of corporations to prevent critical reports by threatening to start defamation proceedings knowing the publisher could not afford to defend the case.
Lady Hayter said the amendment simply required companies to obtain a court's permission before pressing ahead by showing they had been or were likely to be caused substantial financial loss.
Lord Lester backed the move, insisting it was "moderate and balanced".
Fellow Lib Dem QC Lord Marks of Henley-on-Thames said it struck the right balance between free speech and protection of a company's reputation as it wouldn't prevent companies from suing for defamation if substantial financial loss was suffered or likely to be suffered.
But government spokesman Lord Ahmad of Wimbledon said unjustified and defamatory allegations could do considerable damage to a company's reputation.
He said ministers recognised the need to ensure powerful businesses couldn't "bully" people with limited means into remaining silent but imposing specific restrictions on the ability of businesses to sue did not seem justified.
"The twin track approach we are proposing is preferable. All claimants, corporate or otherwise, will have to satisfy the new test of serious harm."
This would "raise the hurdle" for bringing a claim, ensuring "trivial" ones did not proceed.
The Bill would bring "significantly more protection to defendants with limited means and lessen the likelihood of attempts being made to threaten and intimidate them, while still enabling business to protect their reputation where this has been seriously harmed by unjustified allegations," he said.
Later analysis of division lists showed that on the Leveson vote there were 12 Tory and five Lib Dem rebels. Voting figures suggested widespread abstentions, particularly among the Lib Dems.
The Conservative rebels included major party donor Lord Ashcroft, Prime Minister David Cameron's stepfather-in-law Viscount Astor, former Cabinet ministers Lord Fowler, Lord Hurd of Westwell and Lord Moore of Lower Marsh.
The other Tory rebels were Lord Campbell of Alloway, Lord Inglewood, Baroness Knight of Collingtree, the Earl of Liverpool, Lord Lucas, Baroness O'Cathain, and LordTugendhat.
The Lib Dem rebels were Lord Dykes, Lord Maclennan of Rogart, Baroness Nicholson of Winterbourne, Lord Oakeshott of Seagrove Bay and Lord Redesdale.
The Government supporters were 108 Tories and 19 Lib Dems, 12 crossbenchers and two others.
The amendment was supported by the 17 rebels plus 175 Labour peers, 65 crossbenchers, six Bishops including the Archbishop of York and nine others.
'Flawed attempt to implement Leveson principles'
A spokesman from the Department for Culture Media and Sport said: "This is not Government policy and we are disappointed the House of Lords has agreed to this amendment, which is a flawed attempt to implement the Leveson principles.
"The amendment would have to return to the Commons and the view of the Culture Secretary (Maria Miller) remains the same - statutory underpinning is not necessary for tough self independent press regulation.
"All the main political parties have agreed that a cross-party approach is best, and these talks are on-going."
A spokesman for press regulation campaign group Hacked Off said: "Hacked Off welcomes this exceptional show of cross-party support for the principle of Lord Justice Leveson's recommendations.
"The scale of the majority shows the strength of feeling in the Lords to implement an effective and independent system of press regulation.
"Parliamentarians in both Houses want swift action and will ensure that either the Government is forced to deliver the full implementation of the Leveson Report into law or the parliamentary majorities will do it themselves."