European Court Rules On Recovery Of ATE Premiums And Success Fees In Privacy And Defamation Proceedings

The proceedings arose from two separate claims brought against the applicant related to its journalistic publications. The first claim, brought by A.S., involved allegations of privacy breaches. A.S., a Libyan refugee who was wrongly implicated in a criminal investigation following the Manchester Arena terrorist attack, sued for breach of privacy and special damages after an article published by the applicant named him as a suspect. A.S.’s legal representation was funded by a CFA, and he also obtained ATE insurance. Following his successful claim, the applicant was ordered to pay A.S.’s costs, including a 75% success fee and an ATE insurance premium.

The second claim, brought by E.H., a clinical psychologist, arose from an article published by the applicant alleging her involvement in discredited claims of historic sexual abuse investigated under “Operation Midland.” E.H. pursued a defamation action, in which she obtained ATE insurance but did not enter into a CFA. The claim settled for £65,000, and the applicant accepted liability for E.H.’s costs, which included a significant ATE premium. 

At the heart of the disputes was the applicant’s contention that the costs awarded under the UK domestic legal regime, in particular the recoverability of success fees and ATE insurance premiums, imposed a disproportionate burden on media defendants, thereby unlawfully interfering with its Article 10 rights. The applicant argued that this recoverability scheme created a “chilling effect” on press freedom by exposing media organisations to excessive and punitive financial risks in defamation and privacy acts. 

The costs regime in question was governed by the Access to Justice Act 1999. Although broad reforms introduced in 2012 addressed some of the flaws of the prior regime, the legislative carve-out for privacy and defamation proceedings meant that claimants in such cases could continue to recover success fees and ATE premiums from defendants, even after the reforms. These “additional liabilities” significantly increased defendants’ costs exposure beyond paying standard reasonable costs, with success fees permitting lawful recovery of up to 100% of base costs and ATE premiums varying widely in amount depending on the perceived risk.

The applicant asserted that the reasoning in the previous European Court of Human Rights (MGN Limited v The United Kingdom, 2011) case, which found significant flaws in the recoverability of success fees under the same regime, applied equally to the present case. The Government contended that essential distinctions existed, particularly with regard to the recoverability of ATE premiums, as they provided reciprocal benefits to unsuccessful defendants in helping them recover their costs.

 Chronology of Relevant Events

• 22 May 2017: The Manchester Arena terrorist attack occurred, leading to the false association of A.S. with the investigation.
• 29 May 2017: The applicant published an article naming A.S., which gave rise to his breach of privacy claim.
• 14 November 2019: E.H. issued defamation proceedings following the applicant’s publication of articles about her involvement in “Operation Midland.”
• 18 July 2018: A.S. obtained ATE insurance, which became recoverable alongside a later 75% CFA uplift.
• 2–4 December 2020: A.S.’s privacy case proceeded to trial on selected heads of claim.
• 25 February 2021: A.S. was awarded £83,000 in damages following the trial for breach of privacy.
• 21 February 2021: The applicant was ordered to pay 90% of A.S.’s costs, including a 75% success fee and ATE premium, amounting to an interim order of £770,670.
• November 2021: The applicant settled A.S.’s costs dispute for £822,421.79.
• 26 August 2020: E.H. increased her ATE insurance cover anticipating trial, with premiums escalating as litigation progressed.
• 25 January 2021: The applicant settled E.H.’s claim for damages (£65,000) along with her legal costs (£709,095.15).

Issues to Be Decided

1. Whether the recoverability of success fees under the CFA regime in respect of A.S.’s claim violated Article 10 of the Convention by imposing a disproportionate burden on the applicant, given the chilling effect on press freedom.
2. Whether the recoverability of ATE insurance premiums in relation to both claims was compatible with Article 10 in light of their intended role in enabling access to justice.

 Applicant’s Arguments

• The applicant contended that the costs regime for privacy and defamation cases created an arbitrary and excessive burden on unsuccessful media defendants, disproportionately interfering with the right to freedom of expression under Article 10.
• Drawing on precedent established in MGN Limited v The United Kingdom, the applicant argued that success fees incentivised excessive litigation costs, lacked sufficient judicial control, and contributed to a chilling effect against journalistic publications, even those pursued responsibly or in the public interest.
• The applicant objected to the recoverability of ATE premiums, asserting that they disproportionately benefited claimants and failed to deliver sufficient reciprocal benefits for defendants. It highlighted that the insurance premiums often included substantial administrative commissions and costs unrelated to adverse costs recovery for defendants.
• The applicant criticised the retention of recoverability in defamation and privacy claims, despite reforms under the Legal Aid, Sentencing, and Punishment of Offenders Act (LASPO) 2012. It argued that this carve-out made publication defendants bear indirect funding burdens for unrelated litigation.

 Government’s Arguments

• The Government contended that recoverable ATE premiums remained a justified element of the costs regime, as they offered assurance to claimants and potential cost recovery benefits to defendants in weaker claims.
• It argued that proportionality safeguards adopted post-MGN, including active judicial management of costs budgets, mitigated the potential for arbitrary or unfair outcomes in costs orders.
• The Government emphasised that A.S.’s CFA uplift (limited to 75%) and ATE premium, as well as E.H.’s absence of a CFA arrangement, demonstrated judicial consideration of proportionality and fairness case-by-case.
• The Government highlighted that A.S. and E.H. lacked comparable financial resources to the media defendant, reinforcing the need for a costs framework that protected access to justice for private claimants in the face of resource inequalities. It also stressed that the facts of the case involved serious harm to the claimants rather than abstract journalistic principles.

Decisions and Findings

The court determined that the requirement for the applicant company, Associated Newspapers Limited, to pay success fees under the conditional fee arrangement (CFA) to the claimant in the A.S. proceedings was disproportionate to the legitimate aims pursued. The court ruled that the recoverability of success fees under the CFA regime exceeded the wide margin of appreciation afforded to the State in creating measures to address access to justice and legal funding.

“The Court concluded that the requirement that the applicant company pay costs to A.S., which included success fees, was disproportionate having regard to the legitimate aims sought to be achieved and exceeded even the broad margin of appreciation accorded to the Government in respect of general measures pursuing social and economic interests.” [96]

The court held that the ATE premium payable under the domestic costs regime for the A.S. claim did not exceed the State’s margin of appreciation. The court reasoned that the premium provided critical protection to successful defendants in enabling cost recovery. Furthermore, the sum (GBP 82,500) was reasonable compared to the damages awarded (GBP 83,000), and the financial vulnerability of the claimant, A.S., supported the need for this form of legal risk mitigation.

“The applicant settled A.S.’s claim for costs in the sum of GBP 822,421.79… The amount paid to the claimant in respect of the ATE premium (GBP 82,500) was therefore approximately the same as the amount paid to him in damages (GBP 83,000)… The facts as presented by the parties indicated that [the claimant] was a Libyan refugee who lost his employment as a consequence of the applicant’s actions. In comparison, … the applicant in the present case was not an individual or small undertaking … but rather it was the publisher of a leading daily newspaper which could be expected to have insurance against this kind of litigation.” [100]

In relation to the proceedings brought by E.H., the court determined that the recoverability of ATE premiums was proportionate and aligned with the legitimate aim of ensuring access to justice. E.H. had not entered into a CFA, removing any liability for success fees on the applicant’s part. The court also observed that the absence of a CFA provided a strong incentive for the claimant to manage her own legal costs effectively, further justifying the proportionality of the ATE premium.

“E.H.’s substantive claim settled for GBP 65,000… While the final settlement was not apportioned… it would be surprising if the negotiated costs settlement did not reflect the substantial nature of the ATE premium… Contrary to the second flaw identified by the Jackson Review, in the course of the proceedings there was a strong incentive for [the claimant] to control the incurring of legal costs on her behalf. Finally, the applicant, as a large publishing organisation, would be expected to have insurance against the kind of proceedings brought by E.H.” [103]

The court concluded that the recoverability of ATE premiums must be evaluated on a case-by-case basis. While the recoverability of success fees violated Article 10 of the Convention under the general rule established in MGN Limited v. the United Kingdom, ATE premiums provided potential benefits to defendants, such as the opportunity to recover costs, and therefore warranted separate consideration in every case.

“While the Court accepted that the recoverability of ATE premiums may be capable of violating Article 10 of the Convention… it has not found there to exist a general rule concerning the recoverability of ATE premiums similar to that which applies in respect of the recoverability of success fees. On the contrary, … the proportionality of the recoverability of an ATE premium will have to be considered on a case-by-case basis.” [99]

Key Transitions in Reasoning Between Claims

• Success Fees vs ATE Premiums: Unlike success fees, ATE premiums were found to provide a tangible benefit to successful defendants by offering insurance-backed protection for cost recovery. However, inconsistency in the proportionality of success fees persisted under the general rule established by MGN Limited v. the UK, discrediting their recoverability entirely in the context of Article 10.
• Claimant-Specific Circumstances: Where proportionality was analysed, the financial vulnerability of the claimants (particularly A.S.) justified the imposition of costs for ATE premiums. By contrast, the claimant E.H. managed her litigation costs without a CFA, reducing the burden on the unsuccessful defendant.