The government is to abolish the recoverability of success fees in defamation cases – but retain it for after-the-event (ATE) insurance premiums, it announced yesterday.
The Ministry of Justice’s (MoJ) decision on costs protection in defamation and privacy cases came five years after it consulted on the issue; it received 48 responses.
Lord Justice Jackson had recommended – and the Leveson report later supported – retaining costs protection in defamation cases and it was one of the few exemptions from the general abolition of recoverability in 2013.
The consultation proposed  the introduction of qualified one-way costs shifting (QOCS) in defamation and privacy cases – depending on the wealth of the party seeking protection.
Full costs protection would be afforded to those who would face “severe financial hardship” if they had to pay the other side’s costs, and there would be partial protection for those of “some means” who could pay something “without seriously affecting their overall financial position”.
The MoJ said yesterday that while there was “some agreement” about the case for reform, many respondents cautioned against the introduction of the proposed regime.
“Concerns included that: that it was overly complicated – particularly in relation to means assessment – and would give rise to satellite litigation; it might encourage speculative or trivial cases being brought by poorer litigants; and it would have a ‘chilling effect’ on investigative journalism.”
As a result, the MoJ concluded that introducing “a new bespoke costs protection regime” as proposed in the consultation was not the right way forward.
Instead, it was to make success fees non-recoverable for cases starting after 6 April 2019. “This will further help to control the costs of these cases and will also give effect to our legal obligations under the MGN v UK judgment of the European Court of Human Rights.
“However, given that the government agrees there is merit in having a costs protection regime in place for these cases, we will maintain, at least for the time being, the regime of recoverable ATE insurance premiums…
“The ATE regime enables parties with a good case to litigate and discharge their article 10 rights (freedom of expression) without the fear of having to pay potentially ruinous legal costs if their case fails.”
In a statement to Parliament, Lord Chancellor David Gauke said this would protect access to justice, and discourage weaker cases “as these are unlikely to be insured”.