Agog at the gag

When Peter Carter-Ruck, Britain's most famous libel lawyer, died in 2003, it was as if an era had ended. He "had a chilling effect on the media”, David Hooper, a former partner in his firm, wrote in The Guardian. "He was a chancer, out for the maximum fee. And he did for freedom of speech what the Boston Strangler did for door-to-door salesmen.”

But any notion that with his passing, the lucrative business of companies and public figures suing media outlets had reached its high-water mark proved misplaced. More than six years on, the Carter-Ruck firm is itself still taking scalps. Its website lists more than 20 triumphs since last May, in which it has secured apologies and in some cases damages from media organisations.

The firm is "quite busy”, says Andrew Stephenson, a Carter-Ruck partner. Its clients are a rich gumbo, ranging from the singer Liam Gallagher to Tom Watson, a Labour minister, and from Trafigura, an oil trading company, to Shakil Akhtar, a mechanic falsely accused of links to terrorist funding.

London's niche as a place for the aggrieved to seek their pound of flesh may thus seem at least as established – and international – as ever. One ever more noticed feature is so-called libel tourism, under which rich individuals and companies use England's strict defamation laws to bring cases that have few links to the jurisdiction.

Yet all this may be about to change. A growing group of campaigners are demanding an overhaul of England's libel laws to make them less favourable to claimants. At the heart of the argument is a supposed paradox: that a country with a history of wresting political powers from overweening autocrats should submit itself to significant curbs on freedom of speech, shutting down debate on subjects ranging from drug safety to corporate corruption.

Even the long-standing resistance to reform in this area shown by politicians – who, perhaps not coincidentally, are well represented among defamation claimants – is starting to weaken. A parliamentary committee last month called for an easing of the rules, while the government has floated proposals to cut the success fees law firms such as Carter-Ruck can claim if they win cases.

While many think there are serious flaws in libel proceedings that do cast a chill over reporting, some question whether the problem is being properly diagnosed and the response to it fully thought through. As Caroline Kean, a partner at Wiggin who specialises in defending media organisations against libel lawsuits, puts it: "What we have is an imbalance between the media and libel claimants. But I don't think the imbalance is nearly as bad as the current campaign is suggesting.”

The movement for change is being led by the Libel Reform Campaign, which is run by Index on Censorship, a free speech organisation, along with the English PEN writers' group and Sense About Science, a charitable trust. The campaign's motto is "free speech is not for sale” and supporters include Monica Ali, the novelist, and Stephen Fry, the broadcaster, actor and author.

Sense About Science says scientists, campaigners, writers, academics and patients have all spoken of how their discussions – and even publications – are being shut down by the threat of libel action. "Critical and open debates are vital in medicine and the public are badly missing out without them,” says Tracey Brown, the trust's managing director.

The first of several strands to the campaign is that the English courts require far too much of defendants accused of libel. Their remarks are assumed to be false and financially damaging, unless they can prove they were true, or were fair comment, or – if incorrect – were the product of a vaguely defined and still evolving judicial notion of responsible journalism. It is a system that, critics say, can miss the big picture by focusing on the rights and wrongs of a single word. One of the highest-profile cases of the moment, involving Simon Singh, a science writer, centres on whether he libelled the British Chiropractic Association by claiming that it happily promoted "bogus” treatments.

Campaigners also point to the libel tourism evident in cases such as that of Rachel Ehrenfeld, the US author who in 2005 lost an action (which she decided not to defend) brought by Khalid bin Mahfouz, a Saudi Arabian businessman, accused by her of being linked to terrorist financing. The High Court in London took jurisdiction largely because 23 copies of Ms Ehrenfeld's book had been bought in England and because the first chapter of it was available online.

The Ehrenfeld case helped prompt American federal and state legislators to push forward laws to prevent English libel judgments from being enforced in the US, on the grounds that they breached constitutional guarantees of free speech.

A third thrust of the libel reform movement relates to the cost of defamation cases, which critics say are so great as to force some media organisations to abandon their defences of credible stories or simply to avoid publishing them at all. This effect has been accentuated by the rise of so-called "no-win, no-fee” arrangements under which law firms that win a case claim an "uplift” from the losing defendants, which can amount to double the firm's costs.

A 2008 University of Oxford study on the cost of libel cases across Europe found that – even excluding no-win, no-fee cases – the jurisdiction of England and Wales was up to four times as expensive as the next most costly, Ireland, and approaching 40 times dearer than third-placed Italy.

The number of defamation claims filed at the High Court in 2008 was less than half the 1995 high-water mark of 560, although lawyers say those figures mask the increased number of settlements before cases are launched. The main change seems less a deluge of lawsuits than a rise in both criticism of the system and in the costs facing media organisations that elect to defend cases.

Yet for all the spectacular lawyers' fees generated by some cases, libel remains a niche business rather than a big business. Carter-Ruck, which lists just 20 lawyers on its website, and its rival Schillings are tiny compared with the big city law firms that dominate the legal profession and employ hundreds.

What has helped bring them under attack – unreasonably, they would argue – is the assertive way they have sought clients in the field that is sometimes known euphemistically as "reputation management”. Carter-Ruck has a question-and-answer section on its website that gives potential customers details of the logistics of bringing cases. Schillings – whose recent clients include Jacob Zuma, the South African president – boasts that it continues "to push the boundaries, not only practicing [sic] law but acting as a catalyst for change”.

The momentum the firms have built up over the past few years now faces a threat at a political level. In January, the government made a surprise proposal – subject to an unusually short four-week public consultation – to slash the maximum uplift in no-win, no-fee cases by 90 per cent.

Jack Straw, justice secretary – who has also launched a broader review of libel law – said freedom of expression and investigative journalism were "fundamental protections to the democracy of this country”. The spirit of Straw's remarks was echoed in a report published last month by a UK parliamentary committee that recommended reversing the burden of proof in libel cases brought by corporations. It also urged the government to crack down on libel tourism, which John Whittingdale, committee chairman, described as a "matter of profound concern”.

Yet critics say the way some sections of the press exercise what Stanley Baldwin, the former Conservative prime minister, once described as "power without responsibility – the prerogative of the harlot” highlights tensions within the campaign for libel law reform and may ultimately be self-defeating. While part of the impetus for change is coming from serious journalists who feel genuinely stymied, some stems from media executives who simply want to curb the financial risk in publishing flaky stories to sell papers. That duality explains for example why the broadcaster Jonathan Ross is an open supporter of the libel law reform campaign but has also used Schillings to sue successfully over false allegations made about him in the media.

The picture is further complicated by divisions within the media over the related area of privacy, which is generating an increasing number of claims against newspapers by public figures such as actors Brad Pitt and Angelina Jolie. While media organisations do not like having to pay out in big-money libel cases, some see that as better than the arrival of a French-style privacy law. They do not want to press too hard for libel law reform in case it becomes a Trojan horse for a simultaneous toughening of the rules that would confer a greater right to privacy on public figures.

By the same token, the government's proposals to squeeze libel lawyers' success fees have also split opinion. Chris Wait, managing director of Temple Legal Protection, which provides insurance cover to claimants in no-win, no-fee defamation cases, says ministers seem to believe these types of claims are "possibly one of the most evil things after Saddam Hussein”. He says he finds it abhorrent the way the media are "being cuddled up to by this government”, adding that the majority of people his company serves are not wealthy and might be unable to bring cases if the changes go through.

Wait may have an obvious financial interest in the status quo but some of his criticisms chime with those heard elsewhere. A report on libel law reform published in January by Andrew Scott of the London School of Economics and Alastair Mullis of the University of East Anglia argues that most libel complaints involve "relatively impecunious claimants who face an uneven legal battle against multinational media corporation defendants”. When it comes to media organisations, the authors note: "Goliath, it seems, is dreaming he is David.”

Experts differ, too, on the degree to which the evidential requirements of libel laws do gag reporting and comment. Lawyers who act for both claimants and defendants say that the Simon Singh case is widely misrepresented as revolving around an instance of simple criticism. In fact, the main allegation – contested by Singh – is the more serious one of whether his use of the word "bogus” imputed dishonesty to the chiropractic association.

It is certainly possible to argue plausibly that journalists should be free to use such language without consequence, or that organisations should not be able to sue in this way – but these points are both more subtle and more open to debate.

Some lawyers fear the increasing shrillness on both sides of the libel divide risks obscuring quick fixes that could be made while the more fundamental fight over the philosophy of the law goes on. One idea is to reduce costs by streamlining the process, cutting down on interlocutory hearings and arcane debate. Another is to make litigious corporations prove they have been financially damaged. A third is to set up a tribunal that – as the Press Complaints Commission is accused of failing to do – would force media organisations to publish apologies for false stories.

As the battle to change the libel rules plays out, its complexity and contradictory nature is highlighted by a high-profile Carter-Ruck case that ended last month. GE Healthcare of the US, part of General Electric, withdrew a libel claim against Henrik Thomsen, a Danish radiology professor who had questioned the safety of one of the company's drugs.

Free speech campaigners had rallied to his cause. The twist was that the law firm known for being the bane of the media acted for the professor rather than the multinational.