Plans to cap what can be multi-million pound legal fees incurred in fighting libel cases were outlined by the Government today after pressure from media groups.

National newspapers have complained about what they call the “chilling effect” that massive legal costs in defamation cases have on freedom of expression.

Launching a consultation paper, Bridget Prentice, the Justice Minister, said: “Excessive costs and their threat may force defendants to settle unwarranted claims.

“The aim of these proposals is to bring more effective cost control to litigation in defamation proceedings and to ensure that costs in this area are more proportionate and reasonable.

“We need to ensure that people’s right to freedom of expression is not infringed and media organisations continue to report on matters of public concern.

The proposals that are now out for consultation include:

* limiting recoverable hourly rates by setting either maximum or fixed recoverable rates;

* mandatory cost-capping or mandatory consideration of cost capping in every case, and

* requiring the proportionality of total costs to be considered when the court assesses claimable costs.

The consultation follows a campaign by lawyers representing publishers and broadcasters who say that costs in libel and privacy cases are now so high that they are having a seriously chilling effect on the media’s right to freedom of expression.

Lawyers who represent the regional and local press say stories that could lead to legal problems are simply not done because of the possible cost of defending and losing a subsequent libel case.

They are also highly critical of the no-win, no-fee Conditional Fee Agreement (CFA) regime, under which litigants with no money can sue media organisations without having to risk their own cash.

Lawyers who take cases on CFAs and win are able to charge a “success fee” of up to double their usual rates, meaning that a losing newspaper or publishers faces far higher costs.

Mark Stephens, head of media with the law firm Finers Stephens Innocent, said that the minister was to be applauded for “addressing the scandal of libel proceedings.”

He said expensive trials “denies all parties access to justice whilst simultaneously chilling free speech. The only winners in the English libel courts are the rich and even richer lawyers.”

Under CFAs or conditional fee agreements, lawyers can double their normal fees if they win. Media organisations say the CFA system encourages lawyers representing claimants to rack up costs, because their clients have no interest in keeping the costs at a reasonable level.

This, they say, means that news organisations often face huge economic pressure to settle a case, even if they have a good defence to an action.

Julian Pike, of law firm Farrer and Co, told a conference this month that the cost of losing a major libel action at trial in a case involving a CFA was now £2.4 million - and emphasised that this would be for an unexceptional case.

Those costs, he said, would comprise the claimant’s legal costs of £750,000, a further £750,000 as the claimant’s lawyers’ 100 per cent success fee, the publisher’s own costs of £500,000 and a further £420,000 for an after the event insurance premium the claimant would have taken out to protect against losing.

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