A Government consultation on the 'disproportionate' costs run up in some cases is being planned for the new year.
Justice minister Bridget Prentice was responding to worries among MPs that Britain's libel laws are being used to stifle free expression and censor books and newspapers.
Labour MP Denis MacShane highlighted the "libel tourism" practice where lawyers can take cases under the no-win, no-fee deals in which they are compensated for the risk of failure by being able to charge the losing side double fees.
Speaking in a Parliamentary debate, Mr MacShane said: "The practice of libel tourism is now an international scandal which shames Britain and makes a mockery of the idea that Britain is a protector of core democratic freedoms."
The former minister highlighted cases where books were able to be read in other countries but not in the UK.
They include Funding Evil, by Rachel Ehrenfeld, who was sued in Britain by a Saudi banker over a book that was not published in this country. A British court ordered all copies of her book to be pulped.
Mrs Prentice said the no-win, no-fee system, technically called conditional fee agreements, should continue because it helped claimants with little money.
But she added: "We also, of course, realise that we are concerned about the disproportionate cost of defamation proceedings and we are considering whether there are additional measures that might be necessary to control the cost of defamation proceedings and we will be consulting on that shortly."
The system was designed to help the less well-off but is now being used by the rich and famous, critics said.
A series of High Court cases have involved individuals who live abroad and publications that are barely read in Britain.