No UK media law firms have made conditional fee agreements (CFAs) work properly by achieving overall costs neutrality, a leading defamation lawyer claimed in Prague.

Alistair Pepper, a partner at London firm Carter-Ruck, explained that the problem with defamation is that when a claimant loses, it tends to be late on or at the end of proceedings after large costs have been incurred, whereas publishers settle successful cases far earlier. 'So you need a huge number of wins to compensate for the losers,' he said.


Mr Pepper told the session on international media claims management that he recognised the problems media defendants have in libel cases, where if they fight and lose, they can end up paying the claimant lawyer £600 to £700 an hour because of the success fee. But the other side of the coin is the access to justice that CFAs afford, he said.


The key for defendants, he suggested, is to have lawyers who move quickly to decide whether or not to settle - many of his cases settle within hours. 'A success fee on not very much is not very much,' he pointed out.


Carter-Ruck operates a staged success fee of 25% pre-issue, 50% post-issue up to 45 days before trial, and 100% thereafter; the after-the-event insurance is similarly stepped and Mr Pepper said this all encourages early settlement.


He explained that Carter-Ruck takes out insurance from the outset because the underwriters do not want it to cherry-pick the best cases. 'The premiums are relatively modest at an early stage,' he said - a few thousand pounds for up to £100,000 of cover. Thereafter, it can be 40 to 60% of the sum insured.


Gail Hambly, general counsel at Australian media company John Fairfax Holdings, told delegates that her nightmare scenario was facing a libel action in the UK, where CFAs would force a settlement in a case that she would otherwise fight and probably win in Australia.


US lawyer David Smallbone said he is increasingly seeing libel tourism taking the form of claimants seeking to bring action in jurisdictions whose costs systems encourage settlement.