Contingent Fees for Lawyers in the EU: Are Exceptions Granted in the Right Circumstances - Research Paper Example

 Seems to be good..can you make a revision more like in terms of proof reading and beautifilize the context a bit...better vocabulary or like linking words and stuff.. Pros Of late, some Member States of the EU have permitted some guise of contingency fees in EU, so it might be practicable to accomplish adequate political support among Member States for fine-tuning the legl cost relatedrules. This research paper strongly advocates that collective actions wouldhave to be permitted in EUso as to improve the access to justiceby downtrodden persons, especially for the victims of infringement of competition laws in EU by facilitating such victims to recourse to contingency fees’ method to find a solution to their legal issues. This research paper tries to emphasise that some pretext of contingent fees can lead to asizeablereduction in the number of insignificant legal cases as the lawyers will be choosy in selection of cases.In U.S.A, where class actions are commonly initiated, especially , in all Intellectual property claims, investors’ grievances have been initiated mainly through the class-action suits. (Sittenreich, 2010, p.2735). It is recommended that the same process should also be followed in EU also. Further, some EU Member States like Sweden and Germany allow some form of contingent fees. One another way to initiate legal action against competition law infringement is through the contingency fee mechanism which will boost the morale of lawyers in getting success in their legal action. This would be more significant in collective action claims as claimants may not have the required expertise and skills to function as the group representative. Further, contingency fees may act as an encouragement to lawyers to accomplish the maximum possible recovery for the claimants as their own survival would rest upon that of their clients. Lawyers and plaintiffs have invented creative means to avoid the payment of contingent fees where there are formal restrictions in paying the contingency fees. For example, in Netherlands and Germany, a practice has been developed in which an association like a consumer group which is sponsoring litigation will function as an intermediary between lawyers and the individual plaintiff. Thus, the consumer group enters into an agreement with the lawyer and with the individual claimants where such payment contract would not be implemented if the plaintiff loses the case. Through this devise, the claimants enjoy the advantage of contingency fees’ setup with the lawyers eventhough it has been banned in such jurisdiction. (Kelemen, 2011, p.68). As per Magnier (2009), even though the payment of contingent fees is barred in France , from the early 1990s , many lawyers in France have commenced to receive lower billing rates in barter for a “ complementary fee” , or a “ success fee” to be settled laterfooting upon the result of the case. (Kelemen, 2011, p.68). As per Hodges (2007), in various new member states in east-central Europe, the ban on contingency fee isfrequently infringed. As the legal aid systems in various erstwhile communist governments are not only poorly funded, but also underdeveloped and officials have turned a blind eye as litigants and lawyers always resort to contingent fees as a substitute means of financing their litigation. As per Lloyds (2008), a plethora of creative third-party litigation funding setups has materialized across Europe, and this type of arrangement may act as an alternative for contingent fees.Bankrolling of high-risk litigation has been extended by financiers in Europe where normal insurance policies would not cover, in barter for a percentage of any damages awarded.For instance, Cartel Damage Claims is a Belgian company which has introduced an aforesaid business model by functioning as an intermediary in antitrust litigations to overcome the embargos on contingent fees (Kelemen, 2011, p.68). From January 1, 2009 onwards, Italy is allowing collective actions, and the new law authorizes the consumer groups, and court – sanctioned plaintiff groups, to initiate legal action on behalf of those injured under unfair competition, tort, antitrust and infringement of contract. Many other EU’s member states which allow the substantive group-litigation include – Czech Republic, Austria, Spain and Hungary. In addition to the above, Sweden and UK have introduced procedural regulations authorizing courts to administer multiplaintiff cases centrally. Many US-based plaintiff’s firms are now having increased activities in Europe now. Many US-oriented firms have shown interest in initiating collective product liability,antitrust, shareholder’s derivative actions and securities cases in a number of European Union jurisdictions. One Philadelphia –based plaintiffs’ firm declared a “strategic alliance” with a Frankfurt firm in September 2006. A firm from Washington, DC, opened an office in London in April 2007. A settlement with Royal Dutch Shell for $ 400 million was made by three US plaintiff’s firms in April 2007 on behalf of a class of European Investors. The European investors and Shell made their settlement under a new Dutch law allowing a special-purpose representative entity to arrive at settlement of claims on joint terms on behalf of plaintiffs(www.skadden.com). Pros S.no Details of the Pros of Contingency Fees Pros 1 Negative risks of contingency fees are lesser than perceived, and they could be a motivator to lawyers as they can select only deserving cases, which have more succeeding chances (Helland & Tabarrok, 2003, p.540). + 2 As per Leshem (2009), contingent fees offer a stimulus to the legal representatives to work in the best interests of their clients and will act as an alternative to legal fees to be charged on the quantity of time devoted by the lawyer or skill a lawyer devotes to a specified case. + 3 As per Rubinfeld & Scotchmer (1993), under the contingent fees system, there is no need to spend any money by the plaintiff while filing a case as it has an advantage of facilitating more litigants to access to the legal remedy to redress their grievances. + 4 As per Backere & Lathauwer (2012), contingent fee system is extending the legal services to a larger section of the downtrodden population and thereby facilitatating them to go for a legal action when they witness any issues. + 5 Contingent fee can be regarded as a substitute for free legal services that can assure the access to the legal system by economically downtrodden individuals. + 6 As per Emons and Garoupa (2004), the conditional fees may prompt to more risk-sharing between the lawyer, and his client (plaintiff) where lawyer assumes more risk than the plaintiff. + 7 Further, contingency fees may act as an encouragement to lawyers to accomplish the maximum possible recovery for the claimants as their own survival would rest upon the success of the case. + 8 As per Consumer Guarantees (2010),in litigation relating to consumers’grievances as to the quality of products and services, contingent fees’ method is also being widely employed. + 9 As per Attorney Peter Georgiades, in cases of personal injury, like tragic traffic accidents and disability cases, contingent fees are used by such litigants which facilitate them to proceed with the case with no investment or taking of loans to finance the cases. + 10 As per Lambert (2009), in case of Intellectual Property Rights (IPR) litigations, plaintiffs have gradually espoused the use contingent fee so as to transfer the high patent litigation costs to the lawyer side. + 11 As per Miceli and Segerson (1991), in tort cases relating personal injuries, the arrangements of contingent fee have become a normal form of payment contract among lawyers and clients. + 12 As per Polten (2011), the German law exempted any type of contingent fee restrictionespeciallywhen the financial position of the claimant is weak. + 13 In Belgium, though, the contingency fee is banned by law, lawyer’s fee can be determined on the outcome of a case. + 14 According to Sullivan LLP and Quinn Emanuel Urquhart (2012), contingency fees were not legally permitted in the United Kingdom. However, a lawyer is entitled to claim success fee, which may be equivalent to 100% fees agreed for the case, which is dependent upon the successful outcome of the case. + Cons S.No Details of the Pros of Contingency Fees - 1 As per Schwartz et al. (2008), contingent fees can encourage excessive legal action. - 2 As per Brickman (2011), in the name of contingent fees, the lawyers may charge excessive fees. - 3 As per Emons (2000), a number of EU states have recently placed restrictions on contingent fees. - 4 As per Helland and Tabarrok (2002), contingent fees raise conflict of interest among clients and lawyers, especially about the settlement decision. - 5 Lawyers who opt for contingency fees could be very selective of the cases they wish to undertake. - 6 Lawyers may be likely to avoid cases they consider as difficult to win as they may not receive adequate returns for the efforts spent by them. - 7 As per Brickman (2011), one of the most negative factors is that contingent fees embolden excessive legal action. - 8 As per” Schwartz et al (2008)”, contingent fees can be potential as an inducement for allowing extreme recovery by attorneys. - 9 Helland and Tabarrok (2002) alleged that contingency fees encouraged extreme legal action and involve a conflict of interest among lawyers and clients, predominantly about the settlement decision. - 10 As per William (2010), the use of contingency fees is characterized by greed. - 11 As per Ken LaMance, the major disadvantage of contingency fees is that it might be costlier than conventional hourly billing. - 12 As per Sweet & Schneider (2009), contingency fee system provides the lawyer an “entrepreneurial stake in the claim” and he may claim an exorbitant sum from 25% to 50% of the compensation awarded to claimants. - 13 Generally, Contingency fees are construed to distress the independence of the lawyer. - The other main drawback of contingency fees is that lawyers who employ contingency fees could be very choosy of the cases they take. Correspondingly, they are likely to evade cases they believe are difficult to attain success. Contingency Fees and European Union For lawyers in the United States, contingent fees are permitted, and however, contingent fees are prohibited in the majority of Member States of EU.As per Underwood (2006), recently, more and more exceptions have been permitted in the EU countries to allow payment of the contingency fee to lawyers. For instance, Greece allows the contingent fee system but restricts the contingent fee agreement to 20%of the damages paid for the case.EU Member States like Finland, Slovakia, Sweden, Lithuania, Czech Republic and France are allowing a limited form of contingent fees. Hungary and Latvia have allowed unrestricted guises of the contingent fees system analogues to that implemented by the U.S. Success fees is the other form used by the U.K, Ireland and Malta where litigants have to pay some additional fees other than the usual fee which is known as the success fee. As per Grace (2006), Italy is allowing contingent fee, whereas Netherlands and Germany have discouraged the contingent fee agreements as the mode of payment for lawyers. Japanese legal system allows start-up fees and success fee system. As per Brown &Snyder (2012), Denmark allows “uplift fees” and the conditional feesare now permitted. This research essay has used the interpretivism approach which connotes that it is vital for the researchers to distinguish and intensely comprehend the part played by humans and their differences as social factors (Saunders et. al. 2012). Thus, it is necessary to analyse the two controvert sides of contingency fee system and to assess the exceptions granted within the EU. Furthermore, the interpretivism approach is more appropriate so as to divulge the different reasons behind the application of these exceptions within EU (especially in 5 EU nations) in a manner that makes sense and adheres a logical sequence of events. This research strategy envisages an exploratory nature of investigation as the major substantial part of the main objective of this research study concern about the assessment of pros and cons of the system of payment of contingent fees for lawyers in EU nations and particularly in the following five EU nations. UK As per Myers (2010), the UK government is considering the ban of contingent fee which it deems it to be inappropriate given the futuristic path the UK legal system istaking. As per Kritzer (2004), for personal injury cases, it was suggested that the limit for contingent fee be set at twenty-five percent in UK opposing to that of the U.S. , where it was stipulated that a 33% of the net recovery from the damages as lawyer’s fees. As per William (2010), Litigation for the infrignement of patents is usually very expensive in the U.K. Thus, the UK offers exceptions for the application of contingent fee for attorneys in patents’ litigations only, and not for other components of IPR. Pros S.no Details of the Pros of Contingency Fees- UK Pros 1 In case of success in a case, a lawyer is entitled to a success fee instead of the contingent fee, which should not exceed the amount of fees agreed. + 2 Contingent fees are allowed to patent litigations only + 3 For personal injury cases, a 25% cap of claims granted is allowed as contingent fee. + Cons S.No Details of the Pros of Contingency Fees - 1 Payment of contingency fee is generally prohibited in UK - The Netherlands Netherlands bars the payment of contingency fees to lawyers. As per Warren (1997), Netherland lawyers are charging on an hourly basis for the services rendered. As Netherland has introduced substantive law and the employment of legal assistance, only very negligible cases go to courts for resolution. In some cases, lawyers are eligible to claim an hourly rate and also success fee as followed in UK. However, in limited traffic accident cases, if there is a personal injury , then, the use of contingent fee is permitted. Pros S.no Details of the Pros of Contingency Fees- Netherland Pros 2 Contingent fee is allowed only in traffic accident cases + Cons S.No Details of the Pros of Contingency Fees - 1 Payment of the contingency fee is generally prohibited in Netherlands. - Germany For reclamation of property expropriations of Nazi, contingent fee was legal before 1994 and after that it was made not permissible. As per Miege (2005), contingent fee was allowed from 2008 onwards in limited cases where the claimant was not financially strong. Germany law banned agreements, which provide lawyer’s fees, which is solely bank upon the success or outcome of a court litigation. Thus, in Germany, any form of contingency payment to a lawyer is prohibited. Further, lawyers are also prevented from paying any administrative fees, courtfees or other fees on behalf of a client. The German Federal Constitutional Court in 2006 ruled that a complete prohibition of payment of contingency fees was against to the rights of the professional liberty of lawyers as probable claimants could be discouraged from implementing their rights. Due to this ruling, the lawyer’s Remuneration Act was altered in the year 2008 thereby permitting the payment of contingency fees but only in cases where aclaimant is not financially strong. Thus, the contract between the client and the lawyer must include the projected lawyer’s fees as per statute and an indication of what remuneration is payable over and above the agreed fees and under what scenarios. Further, contingency fees will not be included from the costs which are recoverable under fee shifting. In March 2007, Germany’s bar on contingent fees was struck down by Germany’s Supreme court in cases where the plaintiff financially not strong and would not be otherwise be able to fight for his rights. In mid- 2008, the Bundestag, the German Parliament debated strongly for introducing a bill to allow contingency fees in the above-said conditions. Pros S.no Details of the Pros of Contingency Fees- Germany Pros 2 Contingent fee is allowed in Germany from 2008 onwards only in restricted cases where a claimant is not financially strong. + Cons S.No Details of the Pros of Contingency Fees - 1 Payment of contingency fee is generally prohibited in Germany. - Norway As per Mathias (2010), though, contingent fees are barred in Norway, however, in personal injury and IP cases, it is allowed where each of the party to the litigation is construed to be a weak party. Pros S.no Details of the Pros of Contingency Fees- Norway Pros 2 Contingent fees is allowed in IP and personal injury cases. + Cons S.No Details of the Pros of Contingency Fees - 1 Payment of contingency fee is generally prohibited in Norway. - Belgium From 2006 onwards, Belgium is allowing payment of contingent fees for legal professionals. Belgium and other European nations are not awarding punitive and compensatory damages as allowed in the US legal system. Since, lawyers in Belgium are selecting cases on their probability of success and due to this, there is a reduction in cases presented to juries. Pros S.no Details of the Pros of Contingency Fees- Belgium Pros 2 Contingent fee is allowed in Belgium since 2006 + Cons S.No Details of the Pros of Contingency Fees - 1 Contingent fee might be costlier than conventional hourly billing. - Findings Recent corporate scandals in Europe have impacted individual investor’s confidence on a wider scale. This has resulted in the recent shift in the attitude of many EU member nations for the inclusion of private enforcement mechanisms like allowing contingent fees (funding for litigation) or for initiating class action suits. The European Minister of Justice also demanded for introduction of reforms based on U.S. security action claims and to allow private enforcement mechanism like contingent fee system for IP claims and in tort cases. Thus , such legal reforms may soon likely to be a reality as majority of the EU Member Nations are modifying their procedural regulations to permit private enforcement, mainly through security class-action suits and contingent fees for IP and tort cases in Europe. (Grace, 2013, p.283). Thus , the shift towards allowing “ no-win-no-fee” or contingent fee and binding class actions suits will be probable to make private implementation more practicable in Europe , but the existing “ loser pays” regulations will prolong to discourage large-scale usage of such mechanisms in the near future. Coming to the research question, whether recent exceptions in EU countries to the prohibition of contingent fees have been granted for instances where the pros outweigh the cons, we can conclude from the above discussion ,as pros surpasses the cons , exception to the prohibition of contingent fees appears to be justifiable in various European Member Nations. References Grace, S M. (2013). ‘Strengthening Investor’s Confidence in Europe. U.S-Style Class Actions.’ Journal of Transnational Law & Policy, Vol 15 (2), 281-304 Helland, Cf & Tabarrok. (2003).’ Contingency Fees, Settlements Delay and Low-Quality Litigation. 19(2), Journal of Law, Economic & Organizations. 517, p.540. Kelemen, R D. (2011). Eurolegalism. The Transformation of Law and the Regulation in Europe. Harvard: Harvard University Press. Sittenreich, Cf. (2010). ‘The Rocky Path for Private Directors General: Procedure, Politics and the Uncertain Future of EU Antitrust Damages Action’. 78 April, Fordham L Review, 2701, p.2735 www.skadden.com. (2013). US –Style Class Actions Begin to Spread to Europe. Retrieved from June 19, 2014 < http://www.skadden.com/sites/default/files/publications/Publications1638_0.pdf> Read More