The Ministry of Justice will bring in new rules from 1 October to cut ‘no win, no fee’ libel costs, as revealed by the Gazette in August (see [2009] Gazette, 20 August).

The ‘first raft’ of measures constitutes the government response to its February consultation ‘Controlling Costs in Defamation Proceedings’. Three major changes will take effect a week today:

  • Early notice to the publisher if ‘After the Event’ (ATE) insurance has been taken out;
  • A 42-day ‘cooling-off period’ where, if the defendant admits liability and it leads to a settlement, the ATE premiums won’t be payable by the defendant;
  • A mandatory cost budgeting pilot for defamation proceedings, aimed at ensuring that costs are proportionate and within the agreed budget, with close judicial supervision.

Justice secretary Jack Straw said: ‘Freedom of expression and investigative journalism are fundamental protections to the democracy of this country, of which we are rightly proud and the government is working hard to protect.

‘Spiralling costs and disproportionate legal fees are too often a feature of defamation proceedings, skewing justice as defendants choose to settle unwarranted claims rather than face huge libel costs.

‘ATE insurance premiums, a common accompaniment to "no-win, no-fee" civil proceedings, coupled with generous success fees, can make libel cases difficult to fight for some defendants, particularly regional media organisations.

‘That is why the government is taking action to ensure that, where ATE insurance is taken out, defendants are notified as early as possible, and given the opportunity to reach a settlement without being liable for the insurance premiums.

‘As recommended by the Civil Procedure Rules Committee, publication proceedings will also be part of a mandatory costs budgeting pilot, with judges scrutinising costs as cases progress to ensure that they are proportionate and within the agreed budget.

‘But these are only the first steps. We will be watching the pilot carefully and actively considering whether further measures are needed to control costs in this area.’

Media commentators responded by point out that today’s announcement does not cover success fees which allow claimant lawyers to double the charges they levy on publishers who lose. It is understood a second consultation on limiting success fees will be issued by the MoJ shortly.