The Law Society has welcomed the government's decision not to appeal against Chancery Lane’s recent court victory in defeating the previous administration’s plans to make acquitted defendants pay most of the costs of their own defence.

The Law Society challenged the policy introduced by the previous lord chancellor, Jack Straw, to cap at legal rates the costs paid to acquitted defendants who had paid privately for their lawyers.

The judgment handed down last month by Lord Justice Elias and Mr Justice Keith ruled that the policy, which was designed to save money, was unlawful.

The Law Society will recover nearly £170,000 in costs from the government. It said it will donate £10,000 of this to the Bingham Centre for the Rule of Law, which is currently being set up.

The centre, which is part of the British Institute of International and Comparative Law, will be a centre of excellence for the study and promotion of the rule of law.

Law Society president Robert Heslett said: ‘I am delighted that the coalition government has now agreed not to appeal this ruling and I applaud their decision.’

‘This ruling was a great victory for the Society on behalf of innocent people who have been prosecuted by the state.’

He said: ‘The previous lord chancellor’s plans would have meant that many people who were ineligible for legal aid and who were acquitted could have been seriously out of pocket because of the limits on the costs that they could recover.’

Law Society chief executive Desmond Hudson said: ‘I am delighted on behalf of the Society to be able to use part of the legal costs we will recover from the government to make a donation of £10,000 towards the establishment of the Bingham Centre for the Rule of Law.’

‘We recognise that there are severe financial constraints on the Ministry of Justice budget and, not least because of this, we welcome the government's decision not to seek to overturn the ruling in the higher courts.’

Hudson said: ‘Opposition to this policy was a key plank of the Society's manifesto Delivering Justice in the run up to the general election. We are glad that this policy has been finally halted in its tracks.’

Jeanette Miller, founder of the Association of Motor Offence Lawyers, who started a petition on the Downing Street website against the policy, said she was delighted with the government’s decision.

‘I was surprised that the coalition government did not seek to abandon its defence of the judicial review, because the Conservatives in opposition had expressed outrage with the policy,’ said Miller.

She said that, before the election, the Conservatives had mooted progressive ideas to reduce inefficiencies in the court and Crown Prosecution Service, which she hoped they would follow through.

An MoJ spokesman said the department has accepted the judgment of the court and was now considering its next steps, which will be announced in due course.

He said it is crucial for government to achieve value for public money, particularly in the current economic climate, and the policy aimed to do that by giving people accused of crimes access to ‘a fair defence at a fair price’.

‘The scheme was designed to prevent spiralling legal costs while still ensuring access to appropriate legal support, and so we are disappointed with the ruling that the scheme cannot continue,’ he added.