Contingency fees have long been a staple of American law firms and have helped fuel mass tort litigation and class action lawsuits in the United States. In terms of payment, it has proven to be an excellent marketing tool to attract new customers. Accepting payments only if you win your client’s case gives people more affordable options when looking to file a lawsuit. However, in Europe, the rules for contingency fees vary greatly from US law.
In the UK, for example, “conditional rates” are accepted, however they are governed by a different set of rules. A CFA (Conditional Fee Agreement) allows the lawyer to get paid only when he wins the case; however, if the case is won, the attorney will receive their general hourly wage plus a raise, also called the success fee. This fee can be up to 100% of the regular hourly rate, depending on the complexity of the case and the risk involved.
On March 29 of this year, Attorney General Kenneth Clarke announced that he planned to add reforms to the contingency fee arrangements on the grounds that the costs of civil litigation had risen significantly (140 times more in defamation defense cases). and also the number of ambulance chase announcements and claim farmers. In addition, there was a fear that the percentage that the lawyers charged as a success fee would be charged without regard to how much money the claimant had actually won, which could drastically reduce the amount the claimant would actually receive if they won.
Other European countries do not allow this type of rate arrangement… at least in principle. According to the 2004 book “Risks, Reputations, and Rewards: Contingency Fee Legal Practice in the United States,” written by Herbet Kritzer, that is about to change for many European countries. Right now; Australia, Brazil, Canada, the Dominican Republic, France, Greece, Ireland, Japan, New Zealand, Lithuania, and Belgium use contingency fees as a payment option for their customers. In fact, German and Spanish courts have ruled that banning contingency fees is unconstitutional. This could mean that there may be a significant increase in class action and mass litigation in Europe.
So far, the commercialization of litigation finance remains a new concept in Europe. The idea of law firms paying all legal costs and accepting the risks involved if the case loses is not likely to sit well with European regulators. This method can be particularly expensive for companies that are involved in mass torts and class actions. While it has been argued that although litigants have the ability to opt out of a class action, finding new ways to fund these litigations is likely to drastically change the overall picture of European liability.
Despite the fact that many countries have fully adopted the US contingency fee agreements, with their own added appendices, regulators can argue that the use of contingency fees has significantly increased the number of liability laws, leading to Many court systems become congested with legal filings. . Either way, it should be interesting to see how European regulators will prevent various law firms from offering legal services to potential clients on contingency fee arrangements through secret channels.
As I said before, even though contingent fees may be prohibited in many European countries in principle, preventing litigants from commercially advertising such practices, there is great potential to make money by allowing potential clients more affordable ways to finance their laws. . This fact alone is likely to put more pressure on regulators by litigants to allow them to incorporate contingent fee arrangements into a commercially viable payment option.
