Lawyers and judges were accused by MPs yesterday of using “Soviet-style” English libel laws to help the rich and powerful to hide their secrets.

The Saudi financier Khalid bin Mahfouz was condemned as a “libel tourist” for persuading a London judge to fine an American author over a book never sold in Britain.

The British-Iraqi businessman Nadhmi Auchi, who has a conviction for corruption in France and is linked to a fundraiser for Barack Obama, was accused of using the law to stifle debate.

Bridget Prentice, the Justice Minister, told MPs that the Government would announce a consultation on libel and the internet, and the high cost of defamation proceedings.

The Labour MP Denis MacShane, said in Westminster Hall: “The practice of libel tourism, as it is known – the willingness of British courts to allow wealthy foreigners who do not live here to attack publications that have no connection with Britain – is now an international scandal. It shames Britain and makes a mockery of the idea that Britain is a protector of core democratic freedoms.”

The US Congress is proposing a law to stop English courts pursuing American writers for fines over books freely available in the United States. “The case arises from the Kafkaesque position of the writer Rachel Ehrenfeld, whose book, Funding Evil, examined the flow of money towards extremist organisations that preach the ideology of hate associated with Wahhabism and other democracy-denying aspects of fundamentalist Islamic ideology,” Mr MacShane said. “It is not exactly a secret that a great deal of the money that has financed fundamentalist extremist organisations that support jihad has come from Saudi Arabia.”

Ms Ehrenfeld’s book, published in America, not Britain, named a Saudi billionaire called Mr Khalid bin Mahfouz. Although the book was published in the United States, and was not on sale in any British bookshop, he found lawyers to sue in Britain. A British judge imposed a fine and costs on Ms Ehrenfeld, and said that her book should be destroyed, even though she was not in the court. No American court would have entertained such overt censorship.

“There is no freedom of expression in Saudi Arabia, so it is the duty of others to expose what is happening. With the help of British libel lawyers, Mr Mahfouz has launched 33 suits against those who are investigating this important area of public concern. Cambridge University Press was obliged to pulp its book Alms for Jihad, written by Robert Collins and J. Millard Burr, rather than face a libel action in British courts, which seem at the moment to side with those who finance extremism rather than those who seek to curb it.

“What is happening when Cambridge University Press, one of the flowers of British publishing for centuries, has to pulp a book because British courts will not uphold freedom of expression?” Mr MacShane said the British courts had become a “Soviet-style organ of censorship”.

Norman Lamb, the Liberal Democrat MP, accused Mr Auchi and his lawyers, Carter-Ruck, of using the threat of defamation proceedings to close down legitimate reporting. He was connected to Tony Rezco, a fraudster with connections to Mr Obama. “It has been reported in the US that Carter-Ruck has been writing to US and British newspapers and websites demanding removal of material that it deems defamatory of its client, “Many are concerned that creating a link on a blog to a newspaper article, which may have been available for years to anyone searching the internet, can result in action being threatened or taken. Is that legitimate?”

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