The Prudential Regulation Authority is a wholly-owned subsidiary of the Bank of England. It is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment firms.

The Financial Conduct Authority exists to regulate financial firms providing services to consumers and maintain the integrity of the UK’s financial markets, focussing on the regulation of conduct by both retail and wholesale financial services firms. The FCA has assumed responsibility for most of the remit of the FSA, and is based in the same office.

The impact of these changes on the FSA’s investigation into the mis-selling of interest rate hedging products will be minimal. The FCA has taken the FSA Review on-board fully and there have been no fundamental changes to the Review. All on-going work has transferred from the FSA to FCA. The FCA is also now responsible for the management and updating of the Conduct of Business Sourcebook, which is available at www.fsahandbook.info

The legislative fault line concerned the new clause 2 of the “Putnam amendments”, named after the Labour Peer Lord Putnam, who along with Baroness Boothroyd, Lord Mackay and Baroness Scotland had tabled the amendments. Clause 2 proposed to create a statute based press regulator which, in principle, echoed the recommendations of the Leveson Report. The Conservative party, while agreeing with the need for a new and beefed up press regulator, had opposed any statutory underpinning for such a body. The result was a standoff which saw David Cameron indicating that unless there was cross-party agreement the amendment would be dropped, and the Bill could be scrapped altogether.  

Media commentators asserted the Bill’s only chance of success was a cross-party deal on the new press regulator. That came in the form a Royal Charter for press regulation after which it was agreed by the party leaders the controversial amendment would be dropped. The new agreement, perhaps predictably, left both sides claiming a victory. The amendments will be considered on the floor of the House of Commons on 16 April 2013.

Now that the political manoeuvring around the Bill has subsided and a version will in all likelihood come into force later this year, it seems pertinent to consider some of the changes we can expect to the defamation landscape in light of the latest version of the draft Bill.

• First, we can expect the introduction of a new test of what is defamatory. At clause 1 the Bill proposes that “A statement is not defamatory unless its publication has caused or is likely to cause serious harm to the reputation to the claimant.” It is difficult to assess whether this definition will add anything to or significantly differ from the threshold of seriousness already set out in Thornton v Telegraph Media Group [2010] EWHC (QB) 1414.
• Clause 3 of the Bill concerns defamation claims from non-natural persons. The Clause would require for the first time a non-natural person (such as a company) to seek the permission of the court before bringing an action for defamation. The Clause requires the non-natural person to show the publication has caused (or is likely to cause) “substantial financial loss.”
• Clauses 4 and 5 are essentially bringing the common law defences of justification (“Truth”) and honest comment (formerly “fair comment” prior to its rebranding in Joseph v Spiller [2010] UK SC53) onto a statutory footing while abolishing the common law defences. No doubt much court time and money will be spent analysing the differences between the statutory defences and their common law predecessors.
• Clause 6 is highly significant as it proposes the abolition of the common law defence of Reynolds privilege and appears to replace it with a more defendant-friendly public interest defence. This represents a change of emphasis from the common law defence which asks whether the publication was ‘responsible’ (looking at the method of publication) by instead focusing on the honesty and reasonableness of the publisher’s belief that publication would be in the public interest. The Clause is a response to frequent media criticism of the Reynolds defence being costly to argue in court and seldom successful, although it has been suggested that assessing whether a journalist’s belief was reasonable will essentially require the same analysis being applied under the current common law defence and therefore a change in emphasis may make little substantive difference. It remains to be seen how defendant friendly the new proposed defence actually is.
• Further, Clause 6, whilst not abolishing the common law defence of reportage introduces a new statutory form of it. The Government contends the defence reflects the current law as it stands. However, critics have argued the proposed statutory defence is more expansive. In particular they argue the fact the Clause asks whether it was “reasonable for the defendant to believe that publishing the statement was in the public interest” means the court could find the reportage defence satisfied on the basis of the public interest in the allegations themselves. In contrast, they argue the common law defence only applies where the public interest lies in the fact of a dispute and not in the allegations themselves.
• Clause 7 proposes to introduce a new defence for website operators in respect of third party posts. In essence this increases a website operator’s protection for posts by identifiable posters. The defence, unlike the statutory innocent dissemination defence in s.1 of the Defamation Act 1996, is not defeated by any degree of knowledge so long as the operator can show that it did not post the statement. The Clause is also designed to engender website operators to voluntarily disclose to defamation complainants the identify and contact details of the author of an anonymous defamatory post by sketching out a notice of complaint mechanism which if not complied with, would defeat the defence. Although, it should be added many important aspects of the defence have been left to regulations that have not as yet been drafted.
• Clause 8 proposes to introduce a qualified privilege defence relating to peer-reviewed material in scientific or academic journals. The defence would apply where two conditions are met: (1) that the statement relates to a scientific or academic matter; and (2) that before the statement was published in the journal an independent review of the statement’s scientific or academic merit was carried out by the editor and one or more expert prior to publication. The proposed introduction of this defence is to ensure debate on scientific matters is not stifled by defamation laws, this issue having come into focus in 2009 when science writer Simon Singh was sued by the British Chiropractic Association (BCA) for questioning claims it had made for the therapeutic benefits of chiropractic.
• Clause 10 proposes the introduction of the single-publication rule. Previously, the position was a publication occurred each time an individual read a publication, this rule became particularly irksome to newspapers with the advent of the internet and subsequent online versions of their publications. The rule, it was argued, led to ceaseless liability for anything published on the internet. The old rule will be abolished under the single-publication rule proposed in the Bill. From now on, the one year limitation period will begin from the date an article or statement is first published rather than from when it was last read. The change will be particularly protective of internet republications and archives. The Clause also provides the court has the discretion to disapply the limitation period in defamation claims.
• Clause 11 purports to deal with ‘libel tourism’ and provides that where the defendant is not domiciled in either the UK, another EU member state or in a state party to the Lugano Convention, the court would not have jurisdiction to hear a case unless satisfied that “of all the places in which the statement complained of has been published, England and Wales is clearly the most appropriate place in which to bring an action.” Although, it should be added no committee has ever found that libel tourism exists.
• Clause 12 provides that the court would not have jurisdiction to hear and determine an action for defamation brought against a person who was not the author, editor or publisher of the statement complained of unless the court is satisfied that it is not reasonably practicable for an action to be brought against the author, editor or publisher. In effect, this clause adds protection to intermediaries such as retailers but will also apply to online intermediaries such as website operators.
• Clause 13 of the Bill introduces a momentous shift in defamation law by proposing a statutory presumption that defamation trials are to be conducted without a jury. Although, a trial by jury is still possible subject to an order by the court.
• Clause 15 provides that a claimant who obtains a judgment in defamation would be able to obtain orders from the court against those involved in the distribution of that defamatory content to desist from distributing it even though the claimant would not have any cause in action against those intermediaries.

Taken as a whole, the underlying shift indicates a clear attempt to make the current law more Article 10 friendly and to make it harder to bring a defamation claim and even harder to win a claim. However, the Bill leaves a number of important details to regulations which have not as yet been drafted.  As with the introduction of any new legislation it remains to be tested.  If anything, the changes have added complexity to the defamation landscape and there is the distinct possibility litigation will be increased rather than reduced as the parties to an action seek to determine the contours and meaning of the changes.

Link to Bill: http://www.publications.parliament.uk/pa/bills/lbill/2012-2013/0084/2013084.pdf

Carter-Ruck has long been a pioneer of Conditional Fee Agreements (CFAs) and we can now also offer in appropriate cases Damages Based Agreements (“DBAs”), in which the fee is calculated an agreed percentage of the damages if the case is won.  Carter-Ruck is one of the very few firms in England and Wales still able to offer no win no fee funding with  ATE insurance.

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Operation Elveden is running alongside Operation Weeting, the Metropolitan Police’s investigation into phone hacking, and Operation Tuleta, which is an investigation into computer hacking.

So far, Operation Elveden has led to the arrest of a substantial number of journalists from The Sun, along with public officials such as police officers and civil servants, including Bettina Jordan Barber, who has now been charged and is due to appear in court this month alongside Rebekah Brooks and former Sun chief reporter John Kay.  One senior police officer, April Casburn, an ex-Detective Chief Inspector with the National Terrorist Financial Investigation Unit, has already been convicted and sentenced to 15 months in prison for misconduct in public office.

In addition to the criminal prosecution of those responsible, a new wave of civil claims against NGN appears inevitable.

As a result of their investigations, the Metropolitan Police are now contacting people who were the subject of information which was sold to NGN and then published. In many cases this constitutes a serious infringement of that individual’s right to privacy.

Carter-Ruck is currently representing a number of individuals who have been affected. If you require advice regarding a potential privacy claim in connection with Operation Elveden please contact Cameron Doley, Ruth Collard or Zoe Brocket.

Many MENA states encourage foreign investment into their economies.  Investors in the MENA region typically invest in tourism, energy, construction, electricity, shipping and telecommunications sectors.

Foreign investors need the legal conditions of the host state to be secure, stable and predictable so they can reap returns on their investment. They expect the host state to treat them fairly, without discrimination, and according to the rule of law. They also demand protection by the host state’s police and armed forces. 

Many foreign investors now rely on Bilateral Investment Treaties (BITs) to guarantee those rights.  A BIT is an agreement between two nation states. It protects the rights of private citizens from one contracting state who invest in the other contracting state. 

The benefit of a BIT for the investor is that it provides a degree of protection recognised under various principles of international law. It also typically allows the investor to bring a claim directly against the host state by commencing an arbitration, instead of relying on the host state’s national courts.  For the host state a BIT has the benefit of making it attractive to foreign investment.

All of the MENA states in the Arab Spring are committed to BITs. Egypt for example has over one hundred BITs currently in force; while Tunisia, Syria, Libya and Yemen are committed to around a hundred and fifty BITs collectively. 

Foreign businesses in Arab Spring countries will have experienced business interruptions caused by demonstrations, riots, sanctions, or the breakdown of local infrastructure and transport. These events will have caused a loss of revenue for the foreign investor and in extreme cases the loss of their investment.   

Commentators have suggested that these events will trigger a flood of foreign investors bringing arbitration claims to recover their losses. They have compared the Arab Spring with the Iranian Islamic Revolution of 1979, when Ayatollah Khomeini led a popular uprising to overthrow the Shah of Iran. This resulted in thousands of foreign investors bringing investment arbitration claims against Iran.

However one of the goals of the Iranian Revolution was to nationalise foreign investments, particularly in Iran’s oil. By contrast the Arab Spring has been focused mainly on regime change and political reform. Whether we will see a wave of investment claims depends on the specific facts surrounding each MENA country’s uprising and the attitude of its government to foreign investment. 

Whether those claims would succeed depends on the rights available under the relevant BIT and the particular circumstances of the investment.   The investor will have to demonstrate the state’s liability on the facts; and establishing what took place in the midst of a national uprising, and finding reliable evidence, will be a challenge.  In its defence the host state may argue that it was unable to protect the investment due to circumstances beyond its control, namely major civil unrest or war. Such events are sometimes covered under force majeure clauses in commercial contracts, and therefore the parties will also have to consider any relevant commercial contracts between the host state and the investor. 

Since the uprisings began in 2011 several arbitration claims have been registered against MENA states with the International Centre for Settlement of Investment Disputes, primarily involving Egypt.  Some of these have been discontinued as the claims were settled. Meanwhile some new regimes have stressed their continued commitment to their BIT obligations; and investors may prefer to resolve matters amicably and build positive relations with new governments.

However as the events across the MENA region unfold, and new regimes decide on political, legal and economic reforms, it is certain that new legal issues for investors and potential disputes will continue to arise for the foreseeable future.

Click here to see further Claire’s comments on the review.

The Government’s planned reforms had largely been based on Lord Justice Jackson’s recommendations in his final report published in January 2010. With respect to defamation and privacy claims, the report recommended the abolition of the current Conditional Fee Agreement (CFA) regime which allowed for success fees of up to 100% of costs to be recovered from the other side, and in its place recommended that success fees be recovered as a percentage of the claimant’s award in damages. To accommodate this, the report recommended the implementation of a general increase in damages.

With respect to costs protection in the event of loss, the report recommended that ATE insurance be abolished. However, the report stated it was necessary that some form of costs protection be put in place to ensure those of modest means were able to bring a claim without risk of financial ruin. The form of protection prescribed was qualified one way costs shifting (QOWCS). QOWCS at its most basic level means that a claimant will not have to pay the successful defendant’s costs unless he is conspicuously wealthy or has behaved badly during the proceedings.

Lord Justice Jackson made clear that his recommendations were “interlocking” and it was only if the “overall package” was implemented that claimants would enjoy a “generous” regime that “promoted access to justice.”

Instead, with respect to defamation and privacy claims at least, his recommendations were only accepted in part. In line with Lord Justice Jackson’s recommendations, the Government sought to abolish the current CFA regime and replace it with damages based success fees – the latter being supplemented by a general increase in damages by 10% as announced in April 2012, in the case of Simmons v Castle; but crucially the government did not propose to introduce any form of costs protection for claimants in such proceedings.

This approach has been widely criticised on the grounds the new costs regime would lead to a serious impediment to access to justice. While a claimant would be able to bring a claim on a damages based conditional fee agreement, he would not be afforded protection in the event of a loss – where a claimant could be faced with a substantial costs bill. In effect, this would leave any potential claimant of modest means in a defamation or privacy case hopelessly exposed in the event of a loss.

Therefore, the government’s announcement is a welcome development.  While it is accepted the Government has a duty to address imbalances in the civil costs regime, the Government also has a duty to ensure that everyone is afforded the opportunity to protect their reputation from unjustified attack and their privacy from unwarranted press intrusion. A vital part of ensuring this is to provide some form of costs protection for claimants of modest means.

A major factor in the ordeal they suffered in Tanzania was the hostile and defamatory coverage their case received from IPP newspapers. Despite Mr Mengi’s evidence that he was “not responsible, not accountable and not answerable” for the editorial content, Mr Justice Bean found that he had either “encouraged or knowingly permitted” the media campaign and was in that sense “complicit” in the “corruption and intimidation” which had helped his brother, Benjamin, to seize Silverdale farm. On this basis, he upheld the defence of justification.

Mr Justice Bean ordered that Mr Mengi should pay the defence costs on the indemnity basis. In reaching this decision, the factors cited by the Judge included that the litigation was rightly described as “oppressive”, that “enormous costs had been thrown at the case from the beginning, indeed before the issue of proceedings” and that the evidence of the Claimant and his witnesses had in a number of respects been “misleading and untrue.” He further ordered that Mr Mengi should make an interim payment of £1.2million on account of the defendant’s costs.

The case is the latest example, following those brought against Simon Singh, Henrik Thomsen, Peter Wilmshurst and Hardeep Singh, where individuals sued for libel by wealthy claimants have been able to defend their rights with the benefit of conditional fee agreements. Although herself a qualified lawyer, Sarah Hermitage was confronted by a highly experienced legal team in England led by Richard Rampton QC, supported by IPP’s in-house legal department in Tanzania, with apparently limitless resources. According to the budget prepared for the Case Management Conference in November 2011, the legal costs incurred by Mr Mengi even before the issue of proceedings amounted to £298,245.07. It would have been grossly unfair for Sarah Hermitage, who was in no position to fund lawyers to defend her, to be expected to fight the case on her own. As Mr Justice Tugendhat stated in an earlier judgment, when he ordered that Mr Mengi should pay into court £1.86million as security for costs, “one of the obvious realities…is that [Sarah Hermitage] would have difficulty in obtaining the legal advice and representation she needs to defend this claim without the benefit of the CFA which she has made with her solicitors.”

The provision in the Legal Aid, Sentencing and Punishment of Offenders (“LASPO”) Act 2012 by which success fees in conditional fee cases would cease to be recoverable from opponents would make it more difficult for those of limited means to obtain legal representation. In a situation, likely to be common, where the only realistic possibility of paying a success fee will be from the damages recovered, it would only be economically viable for lawyers to act on a “no win, no fee” basis for claimants where the anticipated award is very high. Defendants, like Sarah Hermitage, who have no prospect of recovering damages, would have no means by which to compensate the lawyers for the risk they take when acting on a conditional fee basis.

Access to justice requires that litigants must have a practical “opportunity to present their case effectively before the court” without an “unacceptable inequality of arms” between the parties (See Steel and Morris v UK, 68416/01 [2005] ECHR 103). There is a serious risk, illustrated by the Sarah Hermitage case, that the effect of the LASPO Act as it stands would be to deprive deserving litigants of the legal representation they need.

It is therefore to be welcomed that on 12 December the Under-Secretary of State for Justice, Mrs Helen Grant, issued a Ministerial Statement announcing that the provisions of the LASPO Act which would remove the recoverability of success fees and insurance premiums will not come into force for defamation and privacy claims until a “new regime of costs protection” has been introduced for these proceedings.

The Written Ministerial Statement can be viewed here.

Further information on the Sarah Hermitage case can be found here.

See also Andrew’s 6 September 2011 article “One law for the rich“.

Lord Justice Leveson was right in a number of important respects. First, to recognise the significant failings in the culture, ethics and standards of the press and the overwhelming arguments for a strong independent regulator. While a majority of the British press do uphold and adhere to proper journalistic standards, the actions of a significant minority have demonstrated time and again that self-regulation does not work.

 As such, without the statutory underpinning that the Leveson Report recommends, any proposals for reform were likely to lack credibility in the eyes of victims of egregious press conduct.  Crucial also from the victims’ point of view were perhaps two things in particular: that any regulatory body is truly independent from the press, and also that it has real ‘bite’ – a power to take effective enforcement action against transgressors, which the PCC conspicuously lacked.

 Leveson LJ addressed the question of independence by making clear that a new regulator must not include any serving editors and must also comprise a majority of people who are entirely independent of the press.  In terms of the efficacy of the sanctions regime proposed – which includes financial sanctions of up to 1 per cent of turnover with a maximum of £1m – this will depend almost entirely on the new regulator’s willingness actually to employ these powers.

Richard Hodge comments in the Lawyer Magazine on the forthcoming publication of the Leveson Report.

Leveson LJ’s remit includes providing recommendations for effective regulation to support the integrity and freedom of the press, while encouraging the highest ethical standards. So what should we expect?

It is clear that the Press Complaints Commission (PCC) has failed to protect victims from unjustified press intrusion – highlighted, most publicly – by the recent phone-hacking scandal.

With serious failings in the present structure, it seems almost inevitable that Leveson LJ will set out a far more rigorous system of press regulation. He has so far intimated that this is, indeed, his aim; but the priority must be to ensure privacy rights are protected in a real and effectual way.

To this end, we would expect proposals for a new regulator, with greater independence than the PCC, which has been criticised as being run by the press, for the press. Such a new body must also have power to enforce sanctions that protect privacy by deterring breaches in the first place. And, if privacy is violated, power to ensure appropriate redress is available to victims.

But will the report propose a realistic alternative to the court system? That remains to be seen. If a separate mode of redress is established, through which members of the public may submit their complaint to an independent regulator (perhaps compulsorily, before pursuing legal action), will justice be served?

Prime Minister David Cameron is said to be open minded about future regulation, yet he has previously indicated that he intends to implement Leveson LJ’s recommendations provided they are not “bonkers”.

Perhaps the Leveson Inquiry is a step in the right direction, but whether Leveson LJ’s report will provide a credible answer to press regulation we shall find out on Thursday.