Amongst the proposals are the limiting of lawyers' hourly rates in defamation cases and the setting of an absolute cap on legal costs. The new plans should be in place by October.
Justice minister Bridget Prentice said that the high cost of losing actions risked stifling free speech and reporting on the rich and powerful.
"The aim of these proposals is to bring more effective cost control to litigation in defamation proceedings and to ensure that costs in this area are more proportionate and reasonable," she said. "We need to ensure that people's right to freedom of expression is not infringed, and media organisations continue to report on matters of public concern."
The Government's consultation outlines the reasons for defamation actions being costly. They must be heard by the High Court, and can be heard by a jury. Being a specialist area, solicitors also charge higher fees for such work.
The recovery from the losing party of 100% of the success fee represents a doubling of lawyers' normal hourly rates, the document said. Damage awards are also traditionally low and rarely cover costs.
When people hire lawyers on a no-win no-fee basis there is no incentive for them to control legal costs. They will either lose and not have to pay or will win and have the other party pay the costs, says the consultation document.
"Some claimant lawyers are regularly charging hourly rates of £400–£600 for Band A fee earners. This is at the top end and above the Guideline Hourly Rates for summary assessment of costs," it said.
The document proposes capping the fees that are recoverable from the losing side in a dispute. "Such rates would need to be set at a level which does not deter solicitors from acting in defamation cases and take account of the full range of cases in terms of the claim’s value, complexity and novelty. It would be open to solicitors to charge their own client a higher hourly rate," said the consultation.
The consultation said that the Government backs fixed rates. "The Government believes that there should be some limitation on the hourly rates that can be claimed in defamation proceedings and is minded towards the introduction of a maximum recoverable hourly rate or rates," it said.
The consultation also proposes capping the total cost of any defamation action, or at least making it mandatory for each court to consider cost capping in defamation cases.
"Costs capping order would preclude one party putting undue pressure on the other to settle by incurring ever increasing costs," it said. "The order could be made against either or, where necessary to promote a level playing field, both of the parties. Whilst a party could continue to incur high costs above the cost cap, the other would have certainty as to the level of their exposure in the event that they are unsuccessful."
Prentice said that the capping of costs was designed to eradicate threats by rich litigants of spiralling costs, threats which sometimes force people to stop defending themselves.
"Excessive costs and their threat may force defendants to settle unwarranted claims," she said.
UK libel law is seen as more claimant-friendly than in many countries, and US politicians are campaigning to pass a law there that would restrict the effect of London judgments in the US.
Because almost all newspapers publish on the internet it can be argued that a US newspaper article has been 'published' in the UK and action taken on it here. UK courts have ruled, though, that it must be shown that articles have been read here before action is taken.
In December, the High Court ruled in a case involving a former associate of The Beatles. John Alexis Mardas, also known as 'Magic Alex', won the right to sue in England over an article about him that appeared on the website of The New York Times. Mr Justice Eady said that publication on an accessible page is not sufficient to justify action: a claimant must show that the page was read. But it is not for the courts to specify a minimum number of readers, he said.
US politicians have said that they intend to legislate on this damaging 'libel tourism'.
Earlier this month a committee of the US's Congress held a hearing on the matter.
"Libel tourism threatens not only Americans' first amendment freedom of speech but also their ability to inform the general public about existential threats, namely the identity of terrorists and their financial supporters," Senator Peter King said at the hearing, according to The Guardian newspaper. It said this week that the Ministry of Justice and a Parliamentary committee are considering libel law reforms.
