I moved house over the weekend, which makes things more than a little chaotic at the moment, but bear with me as normal service will be resumed in due course.

Part 2 of my efforts to outline the need for changes in Britain’s libel laws is in the pipeline and will look at the thorny issues of publication and jurisdiction. In the meantime, however, Mike Power has posed an interesting, and in many respects, eminently reasonable question, which opens up a another line of argument I’ve been mulling over.

We use goods and services made and provided all over the world. If there is one area of activity which is perfectly compatible with a global market it is web hosting. Leaving aside large corporate customers, who might have complex requirements, there is no good reason for most webmasters to host their sites with a UK based company. Just on cost alone the UK companies loose out.

So, as much as I would welcome any changes in UK libel laws which might have prevented the take down of the sites of Craig Murray et al, being realistic and faced with a parliament stuffed with lawyers I think, as my old friend used to say, we’ve got two hopes…Bob Hope and no hope.

But so what? Who cares? If there wasn’t a perfectly acceptable alternative there might be a case for getting all worked up over a change to the law (even though I think it would be an exercise in urinating into a strong breeze) but there is an alternative.

Mike certainly has a point. This very blog is hosted in the US, in part for purely economic reasons – hosting in the US is considerably cheaper than in the UK – but also because I’m very much aware that US law presents a much more favourable environment for the free expression of ideas and opinions than does UK law.

So why should we care enough to try and take on and change Britain’s libel laws when there is a perfectly acceptable and viable alternative to be had over the Big Pond?

This is where three broadly economic arguments for change come into play, and its worth outlining them before getting back onto the legal arguments.

Argument number one is by far the simplest and comes down to a matter of hard cash – the money I spend on hosting for this blog goes to a US-based company and into the US economy, not to a British company and into the UK economy.

Now I dare say that the collective economic effect of UK-based bloggers hosting their blogs overseas hardly amounts to a hill of beans compared to the sums of money that routinely slosh around the City of London, but it remains the case that every year there will be x many hundred of thousands, or millions, of pounds leaving the UK for foreign climes in part because its just that much safer to host your blog in the US, or use a US-based free service, than it is to host in dear old Blighty.

Argument number two is fairly closely related to argument one, but potentially of much greater significance to the UK economy, and that is the impact that the UK’s berserker libel laws are likely to have (and are maybe already having) on innovation and the development of new businesses and new business models.

The big trend in on-line innovation is currently what has been dubbed ‘Web 2.0’ the hallmarks of which are an increased emphasis on user interactivity, social networks and the sharing and exchange of information. By far the best description of this I’ve yet come across is that given by everyone’s favorite polymath, Stephen Fry, who described it as:

“an idea in people’s heads rather than a reality. It’s actually an idea that the reciprocity between the user and the provider is what’s emphasized. In other words, genuine interactivity if you like, simply because people can upload as well as download”

Such interactivity is not without its risks, especially when one lives in a country where one can be held liable for libels and defamations in which one has had no actual part.

As I explained in my first article, ISPs and webhosts are held in law to be liable for content hosted on and delivered by their servers even if all they do is rent a bit of webspace and a few technical services, like PHP and MySQL database, to someone else. The same precedent allows forum owners to be held liable for user postings, as happened to Mumsnet, as Heather Brooke outlined here in an article that first appeared in the Times, only for it then to be removed following complaints from Gina Ford, the litigant in the Mumsnet case – it seems that even writing about the state of the UK’s libel laws has its risks when there’s a wealthy plaintiff on the loose, as Heather notes here:

It turns out the libel law in England is even worse than I could possibly imagine. Now I have both Gina Ford and her solicitor Tony Jaffa on my case.

At least Gina Ford has contacted me directly and hasn’t demanded that I take down my blog posts. Her solicitor, however, has not. Instead he pressures me via the Times’ lawyers to remove my blog postings. Perhaps he believes the Times will be more effective at ‘persuading’ me to keep quiet?

It may seem Kafka-esque, but it turns out that even by having a live link to the original article (which the Times has now pulled), I am effectively publishing the original Times piece – even though the article is no longer accessibly on the Times website. Hence I have removed the live link for the time being.

Why has the Times removed my article? Their lawyer states: “It is standard practice in most cases where a solicitor threatens libel for us to take an article down – either until we are satisfied we can defend it or the matters is resolved or not pursued. In this day and age leaving articles up after a complaint has been received receives very short shrift from the courts and inevitably increases the damages that might be payable.”

And, of course, bloggers can also be threatened with legal action over comments posted to their blogs by third parties, as Richard Brunton recently discovered.

With the exception of Friends Reunited, the majority of the major developments and innovations in English language social networking/web 2.0 products are happening in the US – why?

There are no technical reasons why the UK hasn’t spawned its own MySpace, YouTube or Facebook and its certainly not because Britain is lacking in innovation or aspiration, but when you look at the respective legal positions vis-a-vis libel and defamation in the UK as opposed to the US you would have to be just plain daft to base a web 2.0/social networking start-up in the UK, knowing that even one injudicious or contentious comment by a unknown user could easily land you with a hefty set of legal bills.

Why take the risk, when there’s a safer haven just a transatlantic data-line away, one that doesn’t hold you to be legally responsible for the actions of your service’s users.

In the field of social networking and user interactivity – the biggest growth areas in new on-line business in the last couple of year – Britain’s pernicious libel laws place UK-based companies at a serious competitive disadvantage when compared to their US counterparts, who are free to get on with the serious business of building their business without looking over their shoulder for the threat posed by wealthy litigants.

The law, as it stands, quite literally stifles innovation and drives it overseas, to the detriment of the UK economy.

Argument number three derives from one of the cases I’ve already mentioned, that of  Richard Brunton, and could, I suppose, be termed the ‘market for lemons‘ argument.

Brunton was threatened with litigation over comments that appeared under a review of an [unnamed] company:

Under a review I had written about their company comments had been made over a period of two years and these were causing them some concern. Most of these comments said negative things about the individual on the phone and of the company itself. The head of the company stated that he held me personally liable, and if something wasn’t done about this site I would be facing legal action from his company’s solicitors.

Although it then transpired that the individual that contacted Richard has something more all-encompassing in mind:

They wanted comments removed that they didn’t agree with, for example a commenter had said something specific had or had not occurred and the head of the company was disagreeing with their experience and so wanted the comment edited or removed.

We talked for some time about individual comments and finally it came down to the fact that the head of the company wanted all comments that were negative towards them deleted in their entirety.

Which is what, after a couple of threatening letters from the company’s solicitors, the company actually got:

Dear Sir\Madam

Your client: The Company

I refer to your letter dated 24th April 2007.

Once again the requests you make on behalf of your client are unclear. The letter again mentions the removal of the entire weblog and then the removal of the comments on the entry for The Company. The term weblog refers to the entire site (http://weblog.brunton.org.uk), not just the entry for The Company.

However, that said I have assumed that you require the removal of the comments belonging to the The Company’s entry. This has now been carried out and all the comments have been removed. Additionally no new comments can be made on the entry.

I do refute the claim that I am responsible for the comments made by others on the site as I act as a common carrier and not a publisher.

I have been complying with your clients’ demands very reasonably and openly since the Easter weekend telephone calls, and have made all of the changes that he requested barring the censoring of all comments that contained a negative experience of the company.

Despite my firmly held belief that I have done no wrong and operate as any review site would such as Amazon or iTunes, I find that my continuing health issues and my threatened wedding funds mean I am in no position to fight this claim.

With the removal of all the comments and the closure of the comment submission on the The Company entry I trust that we can now treat this matter as at an end.

The current libel law placed Richard in an entirely impossible position because, as it stands, it hold him liable for comments he didn’t make about experiences he didn’t personally have. What was posted to his site, under a review of the company about which neither they or their lawyers appear to have had any complaint, were comments from anonymous visitors detailing their experiences of dealing with the company, at least some of which were negative.

At the point that Richard was contacted (and reading between the lines of his article, the trigger for this seems to have been a Google search for the company’s name that turned up his article, and the negative comments under it, fairly prominently under – or maybe even over the company’s own website) he was put in the position of trying to defend comments the background to which he had no first-hand knowledge against an assertion from the company that these were false/libellous under, had the case reached court, a law which treats allegedly libellous statements are being false until proven true. Such proof, if it exists, would be available to Richard only if he could obtained evidence from the person(s) who posted the comments, which after two years is a bit of a reach in anyone’s book.

This left Richard with an indefensible position unless, as his own lawyer indicated, he wished to take on a expensive and protracted test case and try to overturn Godfrey vs Demon Internet and should that have failed he would, like Demon before him, be left with the choice of settling out of court – which would mean picking up the tab for the company’s lawyers as well – or trying to defend those comments by proving them to be, at least, fair comment, if not true.

Meanwhile, the company making the complaint need prove nothing – in fact it need not necessarily provide any evidence to support its assertion that the comments on Richard’s site were untrue, unless Richard could turn up something to challenge that assertion.

As things stand, the UK’s libel law can – quite correctly – be used by a commercial business – to protect its legitimately acquired business reputation.

However it can also, just as easily, be abused by companies to suppress and remove negative consumer feedback, however well founded, and, therefore, create and sustain the kind of information asymmetry that is the primary characteristic of a ‘lemon market’ – and if the various trademark use/abuse lawsuits and domain name disputes surrounding [companyname]sucks websites up until 2005 – when the matter was settled definitively in the US by the 9th Circuit Court of Appeal in the favour of non-commerical ‘gripe sites’ – is anything to go by then there’s a fair amount of evidence that the latter has been occurring at least as often as the former.

It may well be that one or two of the comments on Richard’s site skirted, if not crossed, the fine line between fair comment and defamation, but as he rightly notes many of comments that reflected negatively on customer experience of the compnay in question did not, and yet these are now gone – presumably for good – as well.

Only today, Credit Card companies are challenging the scope of section 75 of the Consumer Credit Act before the Law Lords. This holds, currently, that credit card companies must refund customers on credit card purchases made overseas – which includes on-line transactions on non-UK websites – of between £100 and £3000, if the goods are damaged during delivery or are not delivered. If successful in their challenge, then UK citizens who get bilked on an overseas transactions will have to either fight their case in a foreign court, providing they can actually establish and gain access to the correct jurisdiction or write off their losses, and if that is what the Law Lords rule, agreeing with the credit card companies, then access to consumer information/feedback will be even more critical that it is now.

And yet we have a libel law that can quite easily be used, even by foreign companies and foreign nationals, to remove the very same kind of comments and feedback that are necessary if one is to avoid being sold a lemon.

Arguments about the value and importance of free speech tend to concentrate on questions of democracy and political debate/discussion but its worth remembering that there are other areas in which free speech is no less important. Consumer protection is clearly one of them, and one that is no less susceptible to manipulation using threats of litigation under the UK’s current libel laws, especially under current conditions where its possible to turn the screw on webhosts, forum owners and bloggers over third party comments that may be near impossible to defend, even if they are completely valid in their content.

So, there are three reasons why we, perhaps, should care about the impact that the UK’s libel laws have.

1. They drive funds that could be going to UK hosting companies overseas,

2. They stifle innovation by making web 2.0 projects far riskier to undertake in the UK than they are in the US, and

3.  The can be too easily used, and abused, to suppress consumer feedback which, in turn, can support/sustain a market for lemons in which UK consumers get bilked.

There are probably other arguments, but not being an economist it make take someone more knowledgeable to outline them fully. What I can say is that, in a global economy, there are economic arguments surrounding the UK’s libel laws and the manner in which these differ from those of the US, in particular, that do need to be explored and carefully considered.

Free expression is not only the basic prerequisite for a functioning liberal democracy but also a requirement for a viable and vibrant ‘knowledge economy’.