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Two journalists who were forced to pay damages over articles they wrote about two strip clubs won their appeal in the European Court of Human Rights, and the state must now pay them damages.
As reported, the journalists in question, Björk Eiðsdóttir and Erla Hlynsdóttir, wrote articles about the nightclubs Goldfinger and Strawberries. Within the articles, they quoted employees who spoke of illegal activities going on at these clubs. However, the nightclubs filed charges of libel against the two, and the testimony of the employees interviewed could not be proven. As such, Icelandic courts ruled that the articles be stricken from public record, and that the journalists be made to pay damages to the clubs.
The journalists believed the courts were wrong to make them pay damages for things that people they quoted had said, and appealed their case to the European Court of Human Rights (ECHR). RÚV now reports that the court found in the journalists favour, and the Icelandic state will have to pay them damages.
In the decision (.pdf file) of the court, they state in part:

The Court was not convinced by the argument, advanced by the Icelandic Government, that Ms Eidsdottir’s portrayal of the strip club owner and the subject matter of Ms Hlynsdottir’s article had not been necessary contributions to a public debate. It noted that well before the publication of the two articles there had been a public debate in the Icelandic media on the tightening of strip club regulations or the banning of such clubs. There was thus no doubt that the articles, seen as a whole, related to a matter of serious public concern. That consideration, however, had not carried any sway in the reasoning of the Icelandic courts.
…
In both cases, the Court underlined that the punishment of a journalist for assisting in the dissemination of statements made by another person in an interview seriously hampered the contribution of the press to discussion of matters of public interest and should not be envisaged unless there are particularly strong reasons for doing so. The Court was not convinced that there were any such strong reasons in either of the two cases. The reasons relied on by the Icelandic Government were thus not sufficient to show that the interference with the applicants’ rights had been necessary in a democratic society. There had accordingly been a violation of Article 10 in both cases.

The Icelandic state will have to pay “Ms Eidsdottir 7,790 euros (EUR) in respect of pecuniary damage, EUR 5,000 in respect of non-pecuniary damage and EUR 25,000 in respect of costs and expenses. It held that Iceland was to pay Ms Hlynsdottir EUR 4,000 in respect of pecuniary damage, EUR 5,000 in respect of non-pecuniary damage and EUR 12,500 in respect of costs and expenses.”
Lawyer for the two journalists Gunnar Ingi Jóhannsson told Vísir that he considers the ruling “a victory for freedom of expression”. Björk, for her part, said that she was “in the clouds” over the decision, adding, “On behalf of journalists everywhere, this is a real victory.”