The FT has reported that it, along with other media companies, is opposing the proposed Section 40 of the Crime and Courts Act. But what is it, and what’s the background to the story? Herbert Smith Freehills senior associate Martin Hevey explains…

What the FT
Read the original FT article at the bottom of the page.

What does UK press regulation look like post-Leveson?

From 2003 onwards, a number of stories emerged in relation to activities of the press including the hacking of mobile phones and emails, and alleged collusion between the police and the press. Many of the complaints focussed on the treatment of celebrities, public figures and, alarmingly, victims of serious crime. In 2011, Lord Justice Leveson was appointed to conduct an inquiry into the culture, practices and ethics of the press.

The Government has recently completed a 10-week consultation into the implementation of the inquiry’s findings. In his report, amongst other things, Lord Justice Leveson proposed that press organisations should be encouraged to join a recognised, independent regulator who would monitor their activities. Part of any regulator’s remit would be to implement a low-cost dispute resolution mechanism, benefitting both the press and the general public.

Lord Justice Leveson recommended that, if the press did not agree to join such a regulator, then they would be subject to potentially adverse cost consequences in any Court proceedings brought against them by members of the public.

The Government is also considering whether to commence “Leveson 2”, a further public inquiry dealing specifically with the relationships between journalists and the police.

What is Section 40 of the Crime and Courts Act?

The default position in litigation in the UK Courts is that whichever party loses the case has to bear its own legal costs and pay for the winning party’s reasonable costs. This is, in part, to discourage individuals (or companies) bringing claims that have no merit.

Section 40 of the Crime and Courts Act provides an exception to that rule so that if a case is brought against a publisher (for example a newspaper), who is not a member of a recognised, independent regulator, the Court’s starting position is that even if the publisher wins the case, the publisher must bear its own costs and pay for the costs of the party bringing the claim (whether it be an average person or a multimillionaire footballer etc).

Section 40 does however, contain exceptions if the Court decides that the claim could not have been resolved by using the resolution scheme of the approved regulator (had the publisher been a member) or it is ‘just and equitable’ in all the circumstances of the case to make a different award of costs or make no award of costs.

Why is the press so opposed to this? ss

So far, ‘Impress’ is the only independent regulator to have obtained Government approval, although it did so by Royal Charter and is therefore viewed by many within the Press as a state entity, which threatens ideals of press freedom.

Consequently, many publishers are unlikely to join Impress and could therefore potentially be subject to s.40’s cost consequences and ultimately have to pay a claimant’s costs, even if they acted correctly in publishing a story.

The press consider this likely to have a chilling effect on what they are able to report. Members of the press feel they would not be able to carry out investigative journalism (for example the investigations into the MPs’ expenses scandal, the investigations into off-shoring of assets for tax reasons or the car manufacturers emissions scandal) because of the threat of expensive legal costs they would need to pay (even if it was right to pursue the story).

In addition, local newspapers with more limited resources are particularly concerned that they too will be subject to frequent unjustified and unmeritorious complaints, with crippling financial consequences.

The proposal to introduce s40 comes against a background of rapidly declining revenues for print publishers, many of whom have laid off numerous employees and are struggling in an increasingly competitive news market against news websites and news feeds on Facebook and other social media platforms

What happens next?

The Government will shortly announce the outcome of its consultation. Whilst there have recently been rumours that the Government may scrap the introduction of s.40, it is unclear whether they will do so or whether they might delay (perhaps indefinitely) its introduction.

Should s.40 be introduced, lawyers who represent publishers or potential Claimants can expect to see a surge in litigation, or perhaps threats of litigation.

Martin Hevey is a senior associate in Herbert Smith Freehills dispute resolution division, who specialises in IT/TMT and energy disputes.

Media companies oppose ‘dangerous’ legal costs proposal
by David Bond

Newspaper groups including the Financial Times have complained about a legal provision that will force them to accept state-backed regulation or face paying the costs of both sides in legal cases, even if they win.

After a 10-week consultation, which closed yesterday, Karen Bradley, the culture secretary, must decide whether to introduce Section 40 of the Crime and Courts Act or scrap it in the face of widespread opposition from the media.

Ms Bradley is also weighing whether to start “Leveson 2” – a second public inquiry into the conduct and culture of the UK press, focused on the relationship between journalists and police.

The government is under pressure to introduce tougher independent media regulation after a scandal over cases of hacking into phone voicemail and Lord Justice Leveson’s 2012 report on the culture, practices and ethics of the press.

National and local newspaper publishers and other news groups have filed submissions calling for ministers to scrap Section 40 – a key measure to emerge after the Leveson report.

It is designed to encourage newspapers to join an approved regulator by offering them protection from having to pay legal costs in libel, privacy and harassment cases that could have been dealt with in arbitration. Those that chose not to sign up to the approved regulator could be liable for costs even if they successfully defended themselves.

The only regulator to be approved under royal charter, Impress, is almost entirely funded by a charitable trust set up by former Formula One boss Max Mosley, a campaigner for press reform.

Editors and media owners say Section 40 will destroy investigative journalism. In its response to the consultation, Associated Newspapers, publisher of the Daily Mail, Mail on Sunday and Metro titles, said: “It is astonishing that, in a 21st century liberal democracy, the government is even considering implementing this illiberal, oppressive and unjust legislation.”

The Financial Times said Section 40 was “not fit to be commenced” and should be repealed “entirely”. Leaving it on the statute book but not brought into force would leave a “legislative sword of Damocles” hanging over the industry.

“It is one thing for a newspaper to be forced to bear its own costs . . . but to have to pay the costs of an unreasonable or wealthy opponent, who knows that the FT will almost certainly have to pay the bill irrespective of outcome, would simply invite unmeritorious litigation that would threaten the FT’s journalistic freedom and activity.”

On Leveson 2, news organisations say many of the issues to be considered by a second inquiry had been dealt with in criminal trials relating to hacking and collusion between journalists and public officials. “Taken together, Section 40 and Leveson 2 invite a dangerous weakening of the UK news industry and with it the UK press’s important continuing contribution to holding power to account,” the FT’s submission ends.

Original article published on Reproduced with permission.