Britain's libel laws are having a "chilling effect" and must be urgently reformed, the Justice Secretary Jack Straw says.
In an interview with Jason Cowley in tomorrow's New Statesman magazine, Straw confirms that the government is drawing up proposals to radically reform the system amid concern that the huge payouts awarded to claimants are attracting 'libel tourists' to Britain.
The rise of 'no-win no-fee' arrangements threatens free speech by making it prohibitively expensive for publishers to defend themselves.
Straw said that the ministers plan to "introduce a radically reduced cap on the level of excessive success fees in defamation cases".
He added: "Our libel laws are having a chilling effect. By definition, it's not hitting the most profitable international media groups, News International or Associated Newspapers and so on, though it's not good news for them. It is hitting the press that is vital to our democracy but whose finances are much more difficult, and that includes magazines, one or two of the nationals, and regional and local newspapers, and it's really bad for them. That's why I will be changing the law on defamation costs".
Research by Oxford University has revealed that the cost of a defending a libel action in England and Wales is now 140 times greater than the average in other European countries.
The government's decision to look again at the libel system follows a threat by the publishers of US papers including the New York Times, the Washington Post and the Boston Globe to abandon sales of their titles in the UK because of the fear of libel.
In a memo to the Commons media select committee they said: "Leading US newspapers are actively considering abandoning the supply of the 200-odd copies they make available for sale in London -- mainly to Americans who want full details of their local news and sport.
"They do not make profits out of these minimal and casual sales and they can no longer risk losing millions of dollars in a libel action which they would never face under US law.
"Does the UK really want to be seen as the only country in Europe -- indeed in the world -- where important US papers cannot be obtained in print form?"
Straw says that the reforms can be made "without the need for primary legislation" and will, instead, be made through secondary legislation.
Civil liberties campaigners are also calling for the burden of proof in libel cases to be shifted so claimants have to demonstrate damage.