David Gauke, lord chancellor and justice secretary, said legal reforms that prevent the lawyer’s success fee from being recovered from the losing party in CFAs, including in 'no win, no fee' cases, which have already been implemented in the majority of cases, would be extended to defamation and privacy cases from 6 April 2019.
The provisions set out in section 44 of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 were not implemented for defamation and privacy cases at the time as the then coalition government instead consulted on a bespoke costs regime for such cases as had been recommended by Sir Brian Leveson following his inquiry into the culture, ethics and practices of the press. The proposals were criticised at the time and were not implemented by the government.
Those bringing defamation and privacy claims on CFA basis will, however, be able to recover the cost of taking out 'event insurance' from publishers, Gauke said.
"The government will keep in place, at least for the time being, the existing costs protection regime," Gauke said. "This means that after the event insurance premiums will remain recoverable for these cases. After the event insurance covers the risks of having to pay the other side’s costs in unsuccessful cases."
"This approach – of abolishing recoverability of the conditional fee agreement success fee, but retaining it for the after the event insurance premium – will protect access to justice, since parties with good cases can still benefit from recoverable after the event insurance in respect of adverse costs; after the event insurance discourages weaker cases as these are unlikely to be insured. This provision will come into force for new cases on 6 April 2019," he said.
Gauke said the reforms will implement a judgment of the European Court of Human Rights in 2011 which held that forcing publishers that lose defamation cases to pay all of the 'success fee' charged in CFA cases was disproportionate and a breach of their freedom of expression rights under Article 10 of the European Convention on Human Rights.
Media law expert Alex Keenlyside of Pinsent Masons, the law firm behind Out-Law.com, said the announcement could require claimant media firms who frequently enter into CFAs with their clients to rethink their approach.
"Obtaining up to 100% success fees in the cases that they win allows those firms to take on more risky cases, too, knowing that the firm can take the hit in the event that such cases are not successful," Keenlyside said. "Now they will presumably have to consider increasing their fees on the more meritorious claims if they still want to take on the weaker claims. Or they might think about entering into CFAs which provide for a certain percentage of their fees to be paid in the usual way, as opposed to 'no win, no fees' where all fees are deferred until success."
"In any event, the announcement should result in fewer weak claims being pursued – claims which can sometimes put media publishers under immense commercial pressure to settle despite the merits of the claim. It will be particularly welcomed at the local media end of the spectrum," he said.