The Ministry of Justice has launched a four-week consultation proposing an ‘urgent’ interim measure to limit the success fees that can be claimed by lawyers in defamation cases.

The consultation paper proposes limiting the uplift charged by lawyers for winning defamation cases taken on under conditional fee agreements (CFAs) to 10% of their fee.

At present, the law permits lawyers to double their fees by claiming a success fee of up to 100% on top of their usual fee. This is payable by the losing party in addition to the ‘after the event’ (ATE) insurance premium.

The MoJ said the proposal aimed to prevent court costs in defamation cases spiralling out of control, which currently acts to deter journalists and writers from publishing articles that are in the public interest, or could force them to settle rather than defend defamation actions.

In his review of costs in the civil courts, published this week Lord Justice Jackson recommended the abolition of success fees and ATE in all civil cases where CFAs are used, with the introduction of other measures to help claimants meet their liability for success fees.

Announcing the four-week consultation justice secretary Jack Straw (pictured) said: ‘The case for an urgent interim measure for dealing with success fees in defamation cases has become clear.

‘Freedom of expression and investigative journalism are fundamental protections to the democracy of this country,’ he said.

Straw added: ‘Lawyers need to recover their costs and be rewarded for their efforts and the risks they undertake when providing people with access to justice in "no win, no fee" cases. But evidence suggests that the regular doubling of fees that currently takes place is simply not justified and the balance of costs between claimant and defendant needs to be reconsidered.’

The proposal follows other measures taken by the MoJ to try to ensure costs are reasonable and proportionate in some publication proceedings, including defamation.

In October 2009, it introduced mandatory early notice of ATE insurance in defamation cases. This was designed to ensure defendants had a clear idea of the potential cost, if they lost, of covering the winning lawyer’s premium for insuring himself against losing the case. The cost of this ATE premium is currently charged to a losing defendant, alongside the success fee.

The government introduced a 42-day cooling off period during which, if the defendant admitted liability and made an offer leading to a settlement, the ATE insurance premium was not payable. It also introduced a mandatory cost budgeting pilot for defamation.

In addition, Straw recently announced the establishment of a working group to review the law of libel, including the law relating to libel tourism, and make recommendations for change if necessary.

A Law Society spokesperson said: 'In light of the very careful review from Lord Justice Jackson on the topic of success fees this comes as a surprise. The maximum success fee was set at 100% so that clients whose chances of success were around fifty/fifty could find lawyers to represent them. Reducing maximum success fees to 10% would be tantamount to abolishingconditional fees and would thus leave people who have been libelled with no effective access to justice. This is a matter which needs to be discussed very carefully as it could affect access to justice. We should not be diverted by a few high-profile cases into damaging changes to the system as a whole.'