Michelle Liptakova, President of the Law Policy Centre of the KCL Think Tank
Arbitration: will publishers buy it? - a student's view on Leveson
30 November 2012
25 March 2013
28 January 2013
1 October 2013
30 January 2013
23 September 2013
Lord Justice Leveson’s Report, published yesterday, concluded a 16 month public inquiry. Leveson proposes an independent self-regulatory body underpinned by statute, free of “any influence from industry and government”.
Putting aside the principle of high standards, Leveson aims to provide a powerful incentive for publishers to join the body. The incentive is financial and twofold: the publishers that join will be able to take advantage of a low cost arbitration mechanism whereas complainants will be discouraged from opting for litigation. By arguing that the Civil Procedure Rules allow him to do so, Leveson wants to see judges awarding punitive damages, regardless whether it is a publisher or a wealthy individual.
There is therefore a lot of trust placed on judicial discretion and willingness, despite the fact that judges are not used to the exercise of awarding punitive damages.
There are many advantages to arbitration which makes it very attractive. It is speedy, fair, effective and low cost. Leveson proposes a coherent mechanism with arbitrators being pooled from retired judges and senior lawyers with expertise in media law, with the award strengthened by a judgment and appeal to the courts by way of review rather than rehearing.
Revealing his rationale, Leveson relies on the simple economics of litigation. He trusts the publishers will ask themselves which option is cheaper, compare the speedy cheap arbitration to the expensive litigation process with the topping of punitive damages and then make a rational, intuitive decision to sign up. It appears to be so straightforward that one almost forgets that publishers themselves might possess a calculator but would add different sums to it.
The regulatory body will incur certain costs which will have to be covered by its future members. As low cost as arbitration can be, making it free for the complainants opens up the possibility of claims brought by members of the public who could not afford litigation before and hence exposes the publisher to give out more cheques but with lesser sums. On top of this, signing up to the scheme itself exposes publishers to fines up to £1m.
Although arbitration is an excellent alternative to costly litigation and should be encouraged, it is difficult to see why it comes as an incentive in the package for the publishers. Even basic intuition suggests that it is an ideal course of action when considering the matter from the weaker party’s perspective and there is no reason why it should not be blatantly stated that this alternative is here for the members of the public to whom damage is caused but cannot afford to seek legal redress.
Its main problem is that the emphasis is placed on the benefits the publishers will reap from joining the scheme, but isn’t arbitration a sufficient enough incentive?
Rather contradictorily, arbitration is a mechanism that would operate in confidentiality and privacy, quite the opposite of publishing details of someone’s private life. This feature might suit the complainants who feel intimidated by the court routine but not those who want the public to know that they are challenging what has been written about them.
Leveson’s economics of litigation argument might fail yet at another point. Awarding punitive damages, unless in very exceptional circumstances, would be a novel exercise for judges and there is no guarantee they would feel comfortable doing so and that the awards would be high enough to incentivise the parties to turn to arbitration. Moreover, what Leveson is asking the courts to do is not to award these damages for the defendants’ pre-litigation behaviour but purely for their choice of litigation. This could prove to be a potentially dangerous step in the wrong direction and is further stretching the courts powers.
By imposing the same burden on a wealthy individual that will have to face punitive damages if he opts for litigation, Leveson shows the avoidance of double standards. It implies that publishers and private individuals are parties bearing equal bargaining power. This assumption might be, however, mistaken.
Expensive litigation is one of the very last things that can be used to discourage publishers from publishing stories that could be challenged in courts, where they might lose. Taking the exercise of this option from the arena of the public eye could result in some unintended consequences. This argument is even stronger in the light of the changes coming with Legal Aid, Sentencing and Punishment of Offenders Act, according to which from April 2013 successful claimants might be deprived of a fourth of their general damages to pay success fees because these will no longer be recoverable from defendants.
Introducing the arbitral arm which will require legislative changes is a step ahead for the members of the public who want to seek legal redress but unfortunately, Leveson was not selling it this way.
The question remains whether, taking all the costs into account, the publishers will buy his economics of litigation argument.
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