The Government is to consult on whether the libel laws should be adapted to take account of the internet and it is concerned at the costs lawyers are charging to take on libel cases hinting today that it may apply a limit.
Junior justice minister Bridget Prentice said the Government would also examine whether the civil law should be changed after MPs complained that wealthy foreigners were using British courts to silence investigative journalists.
Labour MP Denis MacShane, a former NUJ president, with the backing of Tory frontbencher and Times journalist Michael Gove, and Liberal Democrat MP, Norman Lamb, called on the Government to take action to end "libel tourism".
MacShane told the commons in a debate that a small claims court should also be established to allow poorer people "traduced by the press" to seek to address their grievances.
"The Press Complaints Commission is utterly toothless and its code of conduct treated with contempt by the very editors who serve on it," MacShane said.
He said: "We need a small claims libel court perhaps a defamation equivalent of an employment tribunal for the poor and vulnerable who are traduced by the press.
"We need limits on what a libel court can award by a way of damages. There should be no conditional fees except for those on modest incomes."
Prentice told him that that she was not convinced that a small claims court was the right way forward. She said: "But we would look at whether civil law reform might be necessary, though are not yet convinced of that.
"The Government would issue a consultation paper in the New Year on defamation on the internet and would consult "shortly" on the cost of defamation proceedings.
"We are concerned at the disproportionate cost of defamation proceedings and we are considering additional measures that might be necessary to control the costs."
She also agreed with a suggestion made by MacShane and Gove to consider whether the "so called Reynolds Ruling in law which allows a defence of public interest in reporting on individuals" should be enshrined in law.
Prentice told MPs: "Freedom of expression and a press free from state intervention are a fundamental part of democracy and our way of life."
The all-party Commons media committee is to conduct a wide-ranging inquiry into libel law in the New Year.