The European court of human rights today unanimously ruled that the recovery of success fees by lawyers in privacy and defamation cases represents a significant violation of freedom of expression, in a case brought by the publisher of the Daily Mirror.
In a judgment that is likely to have significant ramifications for future privacy and libel cases in the UK, the Strasbourg court ruled in favour of Mirror Group Newspapers, finding that the "depth and nature of the flaws" in the no win, no fee payments system is in breach of the European convention on human rights.
Today's ECHR judgment follows a marathon legal battle by MGN stretching back to 2001, when the Daily Mirror lost a case brought by Naomi Campbell for invasion of privacy, breach of confidence and breach of the Data Protection Act after it published an article and photographs of her leaving a Narcotics Anonymous meeting.
However, the ECHR ruled by six votes to one that there was no breach of the Daily Mirror's freedom of expression in the earlier UK court judgment that the paper had invaded Campbell's privacy.
The model was initially successful in her battle with the paper but a court of appeal later overturned that ruling. Then, in 2004, the House of Lords found by a majority of three to two that Campbell's privacy was invaded by the Trinity Mirror-owned paper.
The Daily Mirror was faced with a total bill for £850,000 for the two appeals, of which £365,000 represented success fees – although the newspaper reached a settlement on costs for a total of £500,000.
Strasbourg today said that the requirement to pay Campbell's success fees was "disproportionate".
"The court considers that the requirement that the applicant pay success fees to the claimant was disproportionate having regard to the legitimate aims sought to be achieved and exceeded even the broad margin of appreciation accorded to the government in such matters," the court judgment said.
Campbell was represented by the London-based law firm, Schillings, which took on her case as a conditional fee arrangement (CFA), entitling it to receive a 95% success fee and 100% of base costs.
MGN said: "This has been a long, hard fight on the success fee in this case, but we have been proved right. Not only that, but the whole system of CFAs with success fees has been found by the court to be flawed.
"This judgment should increase pressure on the coalition government to abolish the recovery of such fees from defendants and we look forward to that happening in the near future. We are disappointed to have lost the breach of confidence claim on a story which everyone agrees was in the public interest and which we have fought to defend for 10 years."
A spokesman for the Ministry of Justice said: "The government is considering the court's ruling and will respond with its observations in due course as invited by the court.
"We have already put plans out to consultation for much-needed reform of conditional fee arrangements, including success fees. This is intended to support wider government efforts to help businesses and public bodies fearful of costly litigation.
"We want to deter avoidable or unnecessary cases by ensuring claimants have a financial interest in controlling legal costs in their case, which will reduce overall costs. Under the current arrangements claimants generally have no interest in the costs incurred because, win or lose, they do not have to pay anything towards them. Our proposals are designed to correct this and prevent the situation in which, regardless of the merits of their case, defendants are forced to settle for fear of prohibitive costs."
Freedom of expression advocates including Index on Censorship, Human Rights Watch and Global Witness told the Strasbourg court conditional fee agreements (CFAs) were having a "chilling effect" on freedom of expression in the UK.
Mark Stephens, the media lawyer who drafted a submission on behalf of the organisations, told the Guardian that today is a "very good day for justice in this country".
"This is a stunningly good result," Stephens said. "I put a brief in on behalf of NGOs [non-governmental organisations] who are being threatened by these rapacious claimant libel lawyers.
"Today the claimant libel lawyers' train has hit the buffers – this is a very good day for justice in this country. Our legal costs are 140 times more expensive than in many countries in Europe. I hope this is a clarion call to judges in the high court to keep costs low."
Jo Glanville, editor of Index on Censorship, added: "This is a resounding triumph, spelling the end of success fees in defamation and privacy cases, one of the most serious chilling effects on freedom of expression in the UK."
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