The Defamation Act 2013: We Need to Talk About Corporate Reputation

Abstract

Large corporations wield huge power and influence. In many instances senior officers within such companies are closely allied to the government of the day. Their views, and arguably preferences, aid ministerial decisions and influence policy. Consequently, the freedom to criticise these corporations is fundamental within a democratically functioning society. According to Baroness Hale in Jameel v Wall Street Journal Europe Sprl, the ability to criticise large companies is at least as important in a democracy as criticising government.

However, it is submitted that the state of our economy, and the socio-economic mobilisation of communities (the continued social and economic performance of a community), is dependent upon the success of such corporations. In turn, the success of a corporation, in most cases, is inextricably linked to its reputation. Indeed, as is submitted below in the second section, the importance of corporate reputation is both explicitly and implicitly enshrined within the Companies Act 2006.

The Defamation Act 2013 came into force on January 1, 2014. According to the Libel Reform Campaign the purpose of the new legislation is to address the "chilling effect" created by pre-2013 Act libel law, which imposed "unnecessary and disproportionate restrictions on free speech", and did not "reflect the interests of a modern democratic society". On receiving Royal Assent in April 2013, the Act was subject to much fanfare from elements of the British media. Indeed, Lord McNally, the Minister responsible for implementing the Act, "emphasised that it should be understood as only part of a wider array of measures oriented towards improving the functioning of the public sphere." During a House of Lords debate in October 2012, Lord McNally suggested that his "intention ... has always been to end up with legislation that works".

Section 1(1) of the 2013 Act has introduced a new test of actual or likely serious harm. This is qualified further for claimants that trade for profit by s.1(2), in that harm to reputation is not serious unless it has caused, or is likely to cause, serious financial loss. This article explores whether, in the case of corporate claimants, where reputation is a valuable asset linked to the financial performance of the company, the s.1(1) and 1(2) provisions may have swung the pendulum too far in favour of defendants and, in seeking to address an "inequality of arms" in favour of corporations, this could undermine the value of corporate reputation.

This article will, first, contextualise corporate reputation as a valuable commercial asset; secondly, consider whether, as the law stood before the Defamation Act 2013, there was an inequality of arms; thirdly, analyse what the requirement of serious harm and the qualification of serious financial loss may mean in practice for corporate claimants, and the right to reputation. Specifically, through the lens of Tesla Motors Ltd v BBC, this article considers potential causation issues that corporate claimants may encounter when attempting to establish actual or likely serious harm arising from actual or likely serious financial loss, and consequently, questions whether this may result in an increase in applications by defendants for statements of case to be struck out in accordance with CPR 3.4, and for summary judgment pursuant to CPR 24. Ultimately, in response to Lord McNally’s statement, it raises the question: "who does the new legislation work for?"

Keywords: Defamation, Libel, Corporate Reputation, Defamation Act 2013, Freedom of Speech, Right to Reputation