Kenneth Clarke cracks down on 'no win, no fee' success charges

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The justice secretary, Kenneth Clarke announced new proposals today to crack down on success fees charged by law firms in no win, no fee cases.

Under UK law, no win, no fee agreements – also known as conditional fee agreements (CFAs) – have allowed law firms to charge success bonuses of up to 100 per cent of base rates.

But under the reforms proposed today, success fees would be limited to 25 per cent of the damages awarded in a case. Law firms would also be forced to recoup success fess from the damages awarded to claimants, rather than from losing defendants.

Today's proposals also include: raising the maximum value of claims dealt with by small claims courts from £5,000 to £15,000 and limiting the high court to claims of £100,000 or more.

An overhaul of the no win, no fee legal system "will have a big impact on defamation cases," Clarke said today.

"When we put together the draft defamation bill and no win, no fee I think we are going to have a great impact."

He added that defamation cases will no longer be a "high rollers' gamble" and acknowledged the risk of being sued for libel is having "a chilling effect" on investigative journalism.

In 2001, lawyers representing Naomi Campbell charged Mirror Group Newspapers (MGN) a success fee of £365,000 after she successfully sued the newspaper publisher for a breach of privacy. MGN took its claim to the European Court of Human Rights and in January the ECHR voted unanimously that success fees charged by law firms in libel and defamation cases violate the right to free expression .