Schrödinger’s cat and the conditional fee arrangement

It has been reported this week that in MGN Ltd v UK the European Court of Human Rights has held that a large percentage uplift of legal costs by way of success fee, payable by the losing party in a privacy case, is an unjustifiable restriction of freedom of expression and therefore contrary to Article 10 of the European Convention on Human Rights. Commentators have suggested that as a result, the UK may be on the hook to reimburse sums paid out by losing parties to cover success fees in defamation and privacy claims.

However, that would be an interesting outcome, for the following reason. Deciding a case and thereby testing whether or not a success fee arises for payment would seem to be a demonstration that freedom of expression was not affected by the success fee in that particular case. Despite the success fee, the losing party will by definition nevertheless have gone ahead to say whatever it was that gave rise to the claim, standing by it to trial. What is more, a court will have found that whatever was said was something that the losing party becoming liable for the success fee was not legally entitled to say. So in that situation, far from being an unjustified obstacle to freedom of expression, the success fee will amount to something that failed to discourage a party from saying and standing by something that it actually should not have said at all (I do not consider for present purposes the current English law prohibitions on what can legally be said, which is another issue).

Instead, it is the inchoate possibility of a success fee in an untested case that is the potential bar to freedom of expression, when it has discouraged a party whose speech would not have been defamatory or otherwise unlawful from speaking for fear of an expensive legal action. Accordingly, it is not really losing parties liable for success fees in concluded actions whom the UK should compensate, but those who have wanted to say something but did not or who said something but recanted in the face of legal threats.

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