The Government has said today that it will take measures to limit costs in libel cases “unless compelling arguments emerge against doing so”.
It is the clearest indication yet that action will be taken to reform a system which has received near unanimous condemnation from the journalism industry.
Admitting that high costs in defamation cases have been a concern for a number of years, the Ministry of Justice says today in its long-awaited libel consultation paper: “The Government agrees there is a problem that should be addressed.”
It adds: “The Government believes that some or all the measures proposed in this paper are neccessary to improve control over legal costs in defamation proceedings.
“This consultation is therefore on the basis that such measures will be taken forward unless compelling arguments emerge against doing so.”
The paper estimates that defamation proceedings in England and Wales cost a total of around £15m a year – assuming that there are around 300 disputes, costing an average of £50,000 per case.
Publishers lose the vast majority of libel case so bear most of these costs.
The paper, titled: “Controlling costs in defamation proceedings”, suggests four ways to keep costs down.
Limiting recoverable hourly rates
The reports states that some claimant lawyers are now charging rates of £400 to £600 per hour – before fees have been potentially doubled by adding a success fee. It notes that because the claimant is not paying the bill, they have no incentive to limit their costs.
The consultation proposes setting maximum rates which can be recovered under no win, no fee.
The consultation states that “cost capping should be applied in all defamation proceedings”.
It says: “A cost capping order would preclude one party putting undue pressure on the other to settle by incurring ever increasing costs.”
The consultation suggests that attendance at a one-day costs capping hearing would add £3,000 costs to either side
After the event insurance premiums
This is the insurance taken out by libel claimants so that if they lose they can pay the winning side’s fees. The premium is paid by the publisher if the claimant wins.
Press Gazette’s media law conference earlier this month heard that an ATE insurance premium for a major libel case is typically around £420,000.
The consultation proposes that claimants taking out ATE should notify the publisher seven days in advance.
The Government also proposes that an ATE insurance premium is not recoverable if a publisher admits liability within a set timeframe to be agreed.
Proportionality of total costs
Under this section of the consultation, the Government suggests that courts should look at total costs, including ATE insurance and any success fee, when judging whether costs charged are “reasonable and proportionate”.
The consulation also asks whether the new proposals should be limited to libel or extended to include privacy and other disputes. The consultation closes on 6 May.