"Once the mechanism is in place it is only a short step to deleting/blocking any truths our masters prefer we do not learn. Resist this mechanism for censorship."
Now, I may be being a bit naive here, but the way I read it this law (if workable which I doubt) would actually be a good thing for "normal people".
Currently the fear you state is a reality. Large companies, governments, interesting US based "churches" etc do stifle truth through threatening the ISP with legal action. Most ISPs just cave in in these cases (and reasonably so as it would cost them lots to fight and nothing to comply) so any quicky redress based system would change absolutely nothing.
On the other hand, as a private citizen your only options for redress at the moment are:
(1) such it up and hope that those who matter don't care and those that care don't matter. This is a bit of a poor choice - the only benefit is it avoids the Streisland effect.
(2) Ask the ISP / data holder nicely to change / delete the incorrect or infringing material and rely on their goodwill to comply. However once the material is in the public domain it is there for life so although this option may remove "bad" stuff there is no realistic redress on offer.
(3) Take action through the courts. This offers a chance to get infringing material changed / removed, apologies issued, future protection against repeated infringements and possible financial redress. But it is very expensive and time consuming - generally beyond the means of al but the wealthier members of our society.
A solution that mediates between complainer and complainee would be cheaper, quicker, far easier and although any compensation would be likely a lot less than outright suing, offer a better mechanism for whatever degree of redress is necessary (from simply deleting or changing stuff through to apologies and payouts). Ultimately the big business responsible would be going toe-to-toe with the weight of the government rather than little people who can be ignored.
However, all of this would require that mediation was mandatory (if requested by either party) and backed by serious consequences for those who abuse, game or ignore the situation - whether it is big business refusing to comply or an individual taking the piss.