January 28, 2025
by Charlotte de Meeûs
On 12 November 2024, the European Court of Human Rights (‘ECtHR’) handed down its judgment in the case Associated Newspapers Limited v. the United Kingdom. The ECtHR assessed the compatibility of the recoverability of legal costs including success fees arising from conditional fee arrangements (‘CFAs’) and after-the-event (‘ATE’) insurance premiums from unsuccessful defendants with the ECHR. In its judgment, which will be analysed in this post, the ECtHR found that the applicable UK regime on recoverable costs violated the freedom of expression of Associated Newspapers Limited (‘Associated Newspapers’), a leading UK publishing company, and therefore infringed Article 10 of the European Convention on Human Rights (‘ECHR’).
The case arose following two defamation claims brought before the English courts against Associated Newspapers, the publisher of the Daily Mail and the Mail on Sunday, in relation to content published by Associated Newspapers in print and online. The first claim for damages was initiated by A.S. following an article published by Associated Newspapers which released information identifying A.S. as a possible suspect of a terrorist attack in Manchester in 2017. The second claim brought against Associated Newspapers was initiated by E.H., a clinical psychologist, who complained about articles published by Associated Newspapers in 2019, suggesting her implication in the fabrication of false allegations of sexual abuses. A.S. and E.H. (i.e., the claimants before the English courts) financed the costs of litigation through entering into CFAs with their legal representatives (for A.S.) and through purchasing ATE insurance (for A.S. and E.H.). Simply put, CFAs are agreements concluded between a client and their lawyers providing that the lawyers’ fees and expenses must be paid only if the case is won, with the lawyers being entitled to a success fee in the event of a successful claim. ATE insurance is typically purchased after a dispute has started to cover the costs of a legal action, in return of a premium. As a result of the UK courts’ decision to award damages to A.S. in the first claim and of the settlement concluded between E.H. and Associated Newspapers in the second claim, Associated Newspapers became liable to pay the legal costs of A.S. and E.H. by virtue of the rules on costs applicable in the UK. The legislation in force at the time provided for a specific form of the ‘loser pays rule’, by virtue of which the losing party was liable to pay the costs of the winning party, including where applicable, success fees arising from CFAs and premiums arising from ATE insurance.
The recoverability of CFA success fees and of ATE premiums as part of recoverable adverse costs in the UK has been subject to several developments in the past decade. Following a number of legislative changes, the Legal Aid, Sentencing and Punishment of Offenders Act of 2012 (‘LASPO’) abolished the possibility to recover CFA success fees and ATE insurance premiums from the losing party. However, LASPO was initially not implemented in publication and privacy proceedings, including in defamation proceedings such as the one at issue. As of April 2019, the recoverability of CFA success fees (but not of ATE premiums) in publication and privacy proceedings was also abolished in the UK. This new regime was however not retroactive, meaning that the recoverability of CFA success fees concluded before its entry into force (i.e., before 2019) was still possible. Since the case at hand fell within the temporal scope of the earlier UK regime allowing for the recoverability of CFA success fees and ATE premiums from losing defendants in defamation proceedings (‘the applicable UK regime on recoverable costs’), Associated Newspapers was required to pay the costs of A.S. and E.H., including a percentage of the CFA success fees and ATE premiums.
Following the proceedings before the UK courts, Associated Newspapers filed a claim before the ECtHR, arguing that its liability to pay the CFA success fees and the ATE premiums violated its freedom of expression under Article 10 ECHR.
In its judgment of 12 November 2024, the ECtHR found that the recoverability of CFA success fees and of ATE insurance premiums constituted an interference with the freedom of expression protected under Article 10 of the ECHR even though some of the underlying claims, including some related to costs, had been resolved through settlement.
Moreover, the ECtHR acknowledged that the recoverability of CFA success fees and of ATE insurance premiums was provided by law and pursued a legitimate aim, namely ensuring ‘the widest public access to legal services for civil litigation funded by the private sector’. In other words, the ECtHR found that the recoverability of CFA success fees and ATE insurance premiums from unsuccessful defendants contributed to the funding of litigation and general access to justice through resorting to private means of litigation funding such as CFAs and ATE insurance rather than through public litigation funding such as public legal aid. According to the ECtHR, this fell within the scope of the protection of the rights of others under Article 10(2) ECHR.
Moving on to determining whether the interference was necessary in a democratic society, the ECtHR distinguished the recoverability of CFA success fees from that of ATE premiums:
Consequently, the ECtHR concluded that the recoverability of the CFA success fees violated Article 10 ECHR. By contrast, it found that the recoverability of ATE premiums did not violate Article 10 ECHR.
In Associated Newspapers v. the UK, the ECtHR relied extensively on earlier case law relating to the UK regime on recoverable costs. While remaining consistent with its earlier findings, the ECtHR also shed light on some open questions. In particular, the ECtHR seems to have clarified its position towards the distinction between the recoverability of CFA success fees and that of ATE insurance premiums.
The ECtHR has in fact repeatedly found that the recoverability of CFA success fees violated the ECHR. In its judgement in MGN Limited v. the United Kingdom delivered in 2011 and in Associated Newspapers v. the UK delivered in 2024, the applicable UK regime on recoverable costs was found to violate Article 10 ECHR, while in the case Coventry v. the United Kingdom issued in 2022 it was found to violate uninsured defendants’ rights under Article 6 ECHR and Article 1 Protocol No. 1 ECHR. More specifically, in its balancing exercise, the ECtHR found in all three cases that the recoverability of CFA success fees exceeded the margin of discretion granted to the States because of the ‘depth and nature’ of the flaws characterising the UK regime (see above for a description of these flaws) which resulted in a disproportionate costs burden on defendants. The ECtHR therefore concluded to a violation of the fundamental rights of the defendants protected under Article 10 ECHR, Article 6 ECHR or Article 1 Protocol No. 1 ECHR. Interestingly, while it used the specific facts of the cases to confirm its findings, the ECtHR made clear in Associated Newspapers v. the UK that a case-by-case analysis was not required for it to reach its conclusion of incompatibility of the recoverability of CFA success fees with the ECHR. Conversely, the ECtHR emphasised that there was no general rule concerning the compatibility of the recoverability of ATE premiums with the ECHR and that this should be assessed on a case-by-case basis. The reason for this distinction was explained by the Court on the basis that ATE insurance ‘has the potential to offer considerable benefits to successful defendants who wished to recover their costs’. In other words, the existence of ATE insurance could also benefit successful defendants who would be able to rely on ATE insurance to recover their costs. This ultimately led the ECtHR to find that there had been no violation of Article 10 ECHR in Associated Newspapers v. the UK regarding the recoverability of ATE insurance premiums.
This clarification has to be welcomed. The case MGN v. the UK of 2011 on which the ECtHR relied heavily in its judgement in Associated Newspapers v. the UK did not concern the recoverability of ATE premiums and the position of the ECtHR regarding the recoverability of ATE premiums against media defendants was therefore not clear. Moreover, in the case of Coventry v. the UK, which was brought on the basis of Article 6 ECHR and Article 1 Protocol No. 1 ECHR, the ECtHR found that the UK scheme viewed as a whole constituted an infringement of the principle of equality of arms of uninsured defendants, protected under Article 6 ECHR, without making an explicit distinction in its conclusion between CFA success fees and ATE premiums.
The ECtHR also appears to have provided more guidance on how the case-by-case assessment should be carried out with respect to the recoverability of ATE insurance premiums. One key consideration in this respect is whether the defendants can be expected to be insured or not. Simply said, in Coventry v. the UK, the ECtHR found that the recoverability of ATE premiums could infringe the fundamental rights of uninsured defendants, who are ‘individuals or small undertakings carrying out modest business without insurance’, as this category of defendants could not be expected to have taken out insurance to cover the risks of this type of litigation. Conversely, in Associated Newspapers v. the UK, the ECtHR found that a leading UK publishing company such as Associated Newspapers could have been expected to take on insurance to cover the costs of such litigation.
Finally, one should also mention the decision of the ECtHR in MGN Limited v. the United Kingdom of 20 September 2022 (not to be confused with the judgment of the same name, MGN Limited v. the United Kingdom of 2011, discussed earlier in this post), in which the ECtHR followed a different approach and found that the recoverability of CFA success fees did not infringe Article 10 ECHR. This decision should however not be interpreted as overturning the general rule set out in earlier case law. The ECtHR’s different approach in MGN Limited v. the UK in 2022 was indeed based on the specific circumstances of that case. In the case MGN Limited v. the UK of 2011, the ECtHR balanced the freedom of expression of the defendant (a media company) with the right of access to a court of the claimant protected by the applicable UK scheme on recoverable costs and found a violation of the defendant’s freedom of expression. In the case MGN Limited v. the UK of 2022, the balancing exercise favoured the claimants’ rights to access the courts due to the defendant’s involvement in illegal newsgathering practices. In this context, the rights protected under Article 10 ECHR did not ‘weigh heavily in the balance’ when assessing whether the interference was proportionate. This demonstrates that the general rule established in MGN v. the UK (2011) is not absolute and that the protection of freedom of expression requires that journalists act in good faith.
To conclude, in Associated Newspapers v. the UK, the ECtHR reminded that States parties to the ECHR have a wide margin of discretion in relation to the implementation of their costs allocation regimes. However this discretion has some limits and measures implemented to enhance access to justice cannot be justified by all means. A careful balance must be struck between the rights at issue. The ECtHR reaffirmed that the freedom of expression is to be granted a significant weight when balanced with the right of access to a court and that measures that may have a chilling effect on the press should be examined with high scrutiny.
Finally, while the case law discussed in this blogpost raised interesting questions about the impact that costs orders can have on fundamental rights, it must also be reminded that they are based on a scheme which is no longer in force in the UK insofar as the recoverability of CFA success fees is concerned. It remains to be seen whether other aspects of national costs allocation schemes implementing the ‘loser pays rule’ will raise new questions of compatibility with fundamental rights in the future.
Strasbourg Observers is an academic blog that discusses recent developments at the European Court of Human Rights. The editorial team of Strasbourg Observers is based at the Human Rights Centre of Ghent University and the Centre for Government and Law of Hasselt University.
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