People embroiled in the Lawyer X scandal will have any damages paid out by the Victorian government capped at $1 million after a law passed with the support of crossbenchers.
The state's upper house passed the Labor government's bill on Thursday limiting the amount of individual compensation payments awarded by the courts for legal claims arising from the saga.
Former criminal barrister Nicola Gobbo passed on information about her clients to police at the height of Melbourne's underworld war two decades ago, often referred to as the 'Lawyer X' saga.
It sparked a royal commission and rush of criminal appeals from many of her high-profile former clients including Tony Mokbel and Faruk Orman, who each had convictions quashed.
The Labor government had sought to prevent those impacted by the Lawyer X scandal from pursuing any compensation, but on Thursday accepted an amendment from Libertarian MP David Limbrick capping compensation to $1 million.
The amendments and the final bill passed by 21 votes to 18 with the support of Legalise Cannabis, Libertarian, One Nation, Shooters, Fishers and Farmers and former Liberal-turned-independent MP Moira Deeming.
The bill's passage signals that the government hasn't shied away from "difficult truths" that arose from the Royal Commission, a government spokeswoman said.
"Our aim has always been to protect Victorians from being burdened from the costs of further spending on these matters so we can continue investing in the things that families rely on," she said.
But the Liberals and Greens opposed bill saying the government and police will not be held accountable for their roles in the Lawyer X scandal.
It also means those wrongly imprisoned, such as Faruk Orman who was jailed for 12 years for a crime which he was acquitted, will have a cap on any compensation awarded.
"This bill is a disgrace because it puts the Labor government above the law in a way that no Victorian citizen could ever be," Shadow Attorney-General Michael O'Brien said.
"This isn't about saving taxpayers' money; this is about avoiding accountability for the State's role in the worst scandal in Victorian legal history," he said.
The Greens integirty spokesman Tim Read said the bill undermines the legal right to litigation and sends a dangerous message to police that they can get away with misconduct.
The bill has been sent to the lower house for final approval.
Ms Gobbo, a former gangland barrister, is suing the State of Victoria for damages, claiming police put her safety at risk and her unmasking as a police informer damaged her health and career.
Ms Gobbo's case has been set down for a Supreme Court trial in September.
