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Why should companies be allowed to sue for libel?

This article is more than 13 years old
Corporate entities' right to use this intimidating weapon in Britain should be limited: they already have enough protections

Should companies be able to sue for libel? The recently launched Lord Lester libel reform bill includes a provision that companies would have to show substantial financial loss before being able to sue. The House of Commons select committee for culture, media and sport has also called for fundamental reform of libel law in respect of corporate reputation, while many Australian states have limited actions in libel to companies with fewer than 10 employees.

But to the conventionally minded English lawyer there is no question that companies should be able to sue for libel. After all, companies are "legal persons" – and in English law, personality goes a very long way. The view is that if "natural persons" can sue for libel then so can companies.

The English courts have nevertheless progressively limited the scope of corporate actions in defamation. The current position is that a company does not have quite as general a right to sue for libel as a natural person does. It can sue only in respect of its trading reputation and, not having feelings, its entitlement to any damages will usually be lower compared with a human claimant.

But should companies be able to sue for defamation at all? In the groundbreaking Derbyshire case of 1993, the House of Lords held that a public corporation could not maintain an action for libel. In 1998 the high court also held that a political party could not sue for libel. In neither case was the undoubted fact that a public corporation or a political party had a reputation taken to be determinative. Instead, the public interest in uninhibited public criticism was deemed more important. By removing the right of a public corporation or a political party to sue for libel, the ability of such entities to threaten to sue is also taken away.

And this is important, for it is the threats to sue which cause libel chill, rather than the actions themselves.

Companies have reputations, and of course in a commercial environment these reputations are important. But companies already have a wide range of legal means to protect their brand and to prevent unfair competition. In terms of intellectual property, companies can and do use the law of trademarks, passing off and copyright to prevent inappropriate and damaging attacks on its brand and its products. There is also the right to sue for malicious falsehoods. And since the introduction in 2008 of the business protection from misleading marketing regulations, companies also have a range of protections from other commercial actors making misleading statements, especially in comparative and similar targeted advertising.

It is rather difficult to see what legitimate purpose the right of a company to sue and – crucially – threaten to sue for libel now has in our society. A brief look at cases where companies have sued individuals for libel – the McLibel litigation, British Chiropractic Association v Dr Simon Singh, General Electric Healthcare v Professor Henrik Thomsen and the still ongoing case of NMT v Dr Peter Wilmshurst – suggests that whatever the general arguments for allowing companies to sue for libel, it is a legal weapon that can be used in unattractive ways and against the public interest.

There is a strong chance that there will be primary legislation on libel in the next couple of years. This is a good moment to ask questions about who should be able to use – and threaten to use – this powerful and inhibiting area of law in a modern democratic society. Given the range of other legal means open to companies to protect their commercial reputations, I think the right of companies to sue for libel should be severely limited, if not abolished altogether. The public interest requires nothing less.

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