The Government looks set to reform 'no win, no fee' deals in civil litigation following this week's European court ruling that such arrangements risk breaching human rights legislation.

The judgment from the European Court of Human Rights (ECHR) partially backed Mirror Group Newspapers (MGN) in its dispute with the model Naomi Campbell, finding that the success fee used by Campbell's lawyer breached MGN's right to freedom of expression.

Media lawyers have swiftly interpreted the ECHR ruling as giving further weight to the wide-ranging proposals to reform the civil litigation regime in England and Wales put forward last year by Lord Justice Jackson. Jackson called for an end to the system where the loser pays the costs of opposing counsel's uplifted 'success' fee.

Though the ruling is not binding on UK courts, the UK Government would be in breach of the European Convention of Human Rights if it failed to amend the regime for such conditional fee arrangements (CFAs). Critics argue that CFAs are routinely used tactically to ramp up costs in claims relating to libel and privacy to force defendents to settle.

Olswang litigation partner Dan Tench told Legal Week: "The Government has been put pushed into a tight corner. Given the ECHR's decision that the success fee in this case constituted a breach of the newspaper's right to freedom of expression, the question now is whether the Government will have to reimburse the Mirror Group. If so, it leaves open the possibility that the Government may have to reimburse media defendants who are forced to pay out success fees in other cases."

He added: "The Government has the keenest possible interest to make changes to the CFA system as proposed by Jackson, otherwise they may find themselves on the hook for these amounts. The Government is unlikely to consider this indirect subsidy of media lawyers a good use of public funds."

The case relates to an article and photographs published in the Daily Mirror in 2001 of the model leaving a Narcotics Anonymous meeting. The piece led to a breach of privacy claim from Campbell that reached the House of Lords in 2004.

The ECHR ruled against MGN in the first complaint, upholding the House of Lords' finding that the paper had invaded Campbell's privacy. However, the court supported MGN's second complaint regarding CFAs – stating that the requirement to pay the six-figure success fee of Campbell's lawyer was "disproportionate".

Davenport Lyons partner Kevin Bays, who has advised MGN since the beginning of the dispute with Campbell, said: "The Strasbourg Court has now decided that the obligation on the newspaper to pay these success fees fell outside the margin of appreciation afforded to a government in implementing social and economic policies and contravened Article 10 of the European Convention on Human Rights."

"The decision simply confirms what the media has been saying for years: recoverable success fees are totally disproportionate and a violation of the right to freedom of speech. It's a pity there has had to be a public finding of a breach of human rights before the Government scraps the current deeply-flawed CFA regime."

However, there remains debate among media lawyers over the full implications of the ruling. Lawyers point out that the decision does not find that success fees would always be incompatible with Article 10.

As such, less aggressive success fee arrangements or cases involving claimants of limited means could still pass a proportionality test. Tench added: "Plainly an important factor in the decision was that Ms Campbell had the resources which meant that she did not need to bring the case using a CFA. The fact that the CFA regime was open to all – including the very rich – and not just to those impecunious litigants who required it was a key flaw identified by [Jackson], which was much relied upon by the [ECHR]. Whether this was a decisive factor is less clear. "

However, the result is still viewed as making it almost inevitable that recoverable CFAs will be abolished in libel and privacy cases. The coalition Government has already voiced its support for the broad thrust of Jackson's proposals. The Ministry of Justice launched a consultation in November on implementing Jackson's recommendations, which is due to close next month.

Campbell was represented by Schillings.