The aftermath the deepwater horizon oil rig explosion

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CommunicationsLaw

Legislation:DefamationAct

EuropeanConventiononHumanRights1950art.10

‘Everyonehastherighttofreedomofexpression.Thisrightshallincludefreedomtoholdopinions andtoreceiveandimpartinformationandideaswithoutinterferencebypublicauthorityand regardlessoffrontiers.’

Article10(2)qualifiesarticle10(1),thusprovidingprotectionfortherighttoreputationbyimposing legitimaterestrictionsonthe10(1)righttofreedomofexpression.Article10(2)prescribes,interalia:

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Reputation as honour exists through an individual's identification with the ‘normative characteristics’ of the fulfilment of social roles within their community and the value their community places on those roles.18Unlike reputation as property, it is not earned through hard work. Instead it derives from the value placed upon the respective role by the individual's community.19Chan argues that although the case law supporting this concept is predominantly linked to the reputation of members of the upper class, politicians and public officials,20the concept is not, necessarily, inapplicable to corporations.21 Chan accepts that a free capitalist market in which trading corporations operate conflicts with a‘deference’ society based on honour, as advocated by Milo.22However, the developing importance placed by corporations upon corporate social responsibility (CSR)23means that companies involved with not-for-profit CSR activities may well be regarded as having reputation as honour,24as such activities are used to increase market value and financial performance through gains in reputation and legitimacy.25

A prime example of this is Business in the Community (BITC),26an international business-led charitable organisation that was founded in 1982 by a number of multi-national companies in response to the 1981 Brixton and Toxteth riots.27The charity brands itself as a ‘business movement committed to transforming business and transforming communities’ by helping member companies to manage their CSR activity.28Members of the charity predominantly consist of FTSE 100, FTSE 250 and Fortune 500 companies.29One of the key drivers for becoming a member of the charity is improving brand value and reputation.30The charity cites case studies involving companies such the Co-operative Group31and Pachacuti32to illustrate the correlation between effective implementation of CSR strategies and increased brand value. The fact that so many major corporations are involved with such an established CSR movement illustrates the nexus between CSR and reputation, attained through ‘the fulfillment of social roles’, manifested in CSR activity linked to the environment and conservation, education, sustainability, community development33and socio-economic mobilisation. Therefore, it is submitted that reputation as honour is a legitimate vehicle through which a corporate defamation claim can be brought. Additionally, BITC works closely with the government34to advise on and influence, the United Kingdom's CSR agenda. The fact that a collection of large multi-national companies can, through a charitable group, such as BITC, influence government policy, legitimises the concept of reputation as honour being used to both criticise a corporation35and for a corporation to sue in defamation.

The European Court of Human Rights also recognised the right in Van Marle v the Netherlands, in that the right to goodwill could be regarded as property for the purposes of article 1 of Protocol 1 ECHR.43If, as has been argued by Smythe et al, a corporation's values are kept alive in a collective memory of its behaviour44, the concept of reputation as property ‘acquired as a result of a company's efforts and labour in the marketplace’ is applicable to trading-for-profit corporations. Additionally, Chan submits that non-trading corporations, such as charities and social enterprises, should also be entitled to protect their corporate reputation by suing in defamation through the vehicle of reputation as property. The premise of the submission lies in the fact that non-trading corporations expend effort and labour to gain, maintain and develop respective reputations. Just because a corporation is not trading-for-profit does not mean that damage to its reputation would not detrimentally impact upon it. For example, according to Chan, it could adversely affect its ability to recruit suitable employees and obtain property and facilities. Sequentially, this may impact upon its ability to fulfil its purpose.45

Despite the varied definitions and conceptualisations of corporate reputation, whatever is subscribed to, there is no doubt that reputation is valuable. As Lord Hoffmann stated above, corporate reputation is an asset which attracts customers.46In the same case, Lord Bingham, Lord Hope and Lord Scott all agreed that reputation is a thing of value,47and, in Dixon v Holden, it was held that reputation is potentially more valuable than other property.48Ultimately, a company's reputation is an asset that requires constant care to ensure that it develops positively from generation to generation.49Analysing and quantifying the ‘value’ of corporate reputation as an asset is imperative in determining the extent to which the Defamation Act 2013, and any consequential tip in balance in favour of freedom of expression, may undermine its value.

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Prior to the 2013 Act coming into force, probably in late 2013, corporations that make successful defamation claims can recover substantial damages without the need to prove special damage.84The ability of corporations to sue in defamation, and recover such damages, has long been the source of debate, due to the apparent conflict with the right to freedom of expression, pursuant to article 10, and, inherently, the public interest. Indeed, Baroness Hale, in her dissenting judgment in Jameel, stated that requiring a corporate claimant to prove special damage:

‘…would achieve a proper balance between the right of a company to protect its reputation and the right of the press and public to be critical of it. These days, the dividing line between governmental and non-governmental organisations is increasingly difficult to draw. The power wielded by the major multi-national corporations is enormous and growing. The freedom to criticise them may be at least as important in a democratic society as the freedom to criticise government.’85

In the European Court's judgment, Steel and Morris had been substantially disadvantaged in their defence of McDonalds' claim, because they had not been able to rely on legal aid.96In addition, it was adjudged that the disparity between the respective levels of legal assistance enjoyed by Steel and Morris, compared to that of McDonalds, gave rise to an ‘inequality of arms’ that created unfairness.97 The breach of article 10(1) emanated from the disproportionate sum of damages awarded against them, in light of the fact that corporations did not have to prove special damage.98Ultimately, the interference with Steel and Morris' right to freedom of expression, although prescribed by law, was not such as to be necessary in a democratic society.99In its judgment, the European Court identified two key conflicting issues, dealt with below.

Campaign groups play a legitimate and important role in stimulating public discussion. Thus, there is a general interest in promoting the free circulation of information and ideas about the activities of powerful commercial entities100, and the possible ‘chilling effect’ on others, is an important factor to consider when assessing the proportionality of interference under article 10(1)101. To the contrary, the European Court proclaimed that large companies inevitably and knowingly lay themselves open to close scrutiny of their acts and, as in the case of the people who manage them, the limits of acceptable criticism are wider.102However, just because the claimant was a large multi-national company it should not be deprived of a right to defend itself against alleged defamatory statements:

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For companies and other organisations trading for profit, the serious harm requirement is qualified further, by section 1(2), which states:

‘For the purposes of this section, harm to the reputation of a body that trades for profit is not serious harm unless it has caused or is likely to cause the body serious financial loss.’

Guidance on what is meant by serious harm can be obtained from the common law definitions of defamation and abuse of process, and the House of Commons debates surrounding the insertion of the term in to the draft Defamation Bill. In Thornton v Telegraph Media Group Ltd114Tugendhat J identified Lord Atkin's test from Sim v Stretch115of ‘would the words tend to lower the plaintiff in the estimation of right-thinking members of society generally’116as authority for establishing a threshold of seriousness.117The jurisprudence surrounding the strike out of claims for abuse of process in the context of potentially defamatory publications also provides some guidance.118In Dow Jones & Co Incorporated v Jameel
119 it was held that a form of abuse of process exists where it can be established that the benefit attainable by the claimant is disproportionate to the cost of the legal proceedings. Therefore, there needs to be a real and substantial wrong.120According to the Lord Chancellor, the term ‘substantial harm’, recommended by the Ministry of Justice in its consultation paper, reflected the requirements under the common law regime121. The new test of serious harm‘nudges up’ this threshold by a ‘modest extent’122and is drafted to allow the court to consider all the relevant circumstances of the case.123However, this is the extent of the limited guidance provided. Ultimately, what actually amounts to serious harm must be determined by the courts on an individual case basis.124With regard to corporate claimants, a sliver of guidance was provided during the debate. In the Lord Chancellor's opinion, someone whose business is damaged, albeit by an allegation in a local newspaper, could almost certainly establish serious harm.125

The Lord Chancellor's opinion is vague and cursory at best as it does not provide any guidance as to what is meant by ‘damaged.’ Could actual or likely serious harm derive from a decline in a company's share price? Using share prices to quantify the value of reputation has already been considered above, but requires more analysis in relation to the notion of serious financial loss pursuant to the 2013 Act.

‘In order to satisfy the serious harm test…Given the potential effect on shareholders and management, we see no reason why there should be no redress for a defamatory action that has caused a fall in share price.’126

Support for this view can be garnered from Holroyd Pearce LJ's judgment in Lewis v Daily Telegraph Limited:127

In theory establishing a serious financial loss to a company due to damage caused to a valuable commercial asset should, in practice, be relatively easily achievable for any corporate claimant. There are, as has been discussed above, mechanisms in place for measuring the value of corporate reputation.140However, it is submitted that there are two particular issues which, in some instances, may prove impossible for corporate claimants to overcome.

*Comms. L. 118 Firstly, the claimant will need to establish causation by demonstrating that the defamatory statement caused or is likely to cause the loss. This would not be an issue where, for

Reputation as honour: 145 an issue of causation (II)

As has been discussed above, reputation as honour is as capable of being defamed as reputation as property,146due, to a large extent, to an ever greater emphasis being placed by companies on CSR activities.147It is submitted that the requirement to establish serious financial loss, whether actual or likely, will prevent companies from pursuing legitimate claims where reputation as honour has been damaged.

Thus, despite the fact that in this example the BBC could be caused serious reputational loss, vindicating its reputation under the 2013 Act would, it is submitted, prove problematic, prolonged and costly.152Indeed, as discussed above with regard to reputation as property, Moore-Bick LJ's observation in Tesla is particularly pertinent, as any attempt to vindicate reputation may expose the claimant to further negative publicity, which sequentially could result in a further deterioration in reputation. Demonstrating actual or likely serious financial loss in these circumstances may only be achieved by, for example, establishing a link between the statement and consequent inability to recruit suitably talented employees which, in turn, results in actual or likely serious financial loss. Evidentially this would be hugely challenging, and, it is submitted, is akin to establishing actual or likely serious financial loss by virtue of a decline in share price. As such, it is subject to the same issues of remoteness, reliability and certainty, due to the amount of variable factors that would be involved. For example: establishing that a potential employee chose to look elsewhere for employment due to the defamatory statement; or, that an employee's performance is below that of a potential employee who would have applied for a position within the company, but for the statement, and that performance shortfall has had, or is likely to have, a negative financial impact.

Conclusion

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Itisfurthersubmittedthatthepotentialeffectofsection1istoswingthependulumtoofarinfavourof thearticle10(1)righttofreedomofexpression,tothedetrimentoftherighttoreputation. Consequently,itcouldcreateareversechillingeffectandnewinequalityofarmsastheprovisionmay rendercompaniesimpotenttodealwithattacksontheirreputation.

Acknowledgements

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