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Limitation of the statutory fees for lawyers in cases with particularly high values in dispute is constitutional

Press Release No. 54/2007 of 15 May 2007

Order of 13 February 2007
1 BvR 910/05

With effect from 1 July 2004, the Federal Code of Lawyers’ Fees (Bundesrechtsanwaltsgebührenordnung) was replaced by the Lawyers’ Remuneration Act (Rechtsanwaltsvergütungsgesetz – RVG). As was the case in the previous regulation, the fees for the services of a lawyer are calculated according to the amount involved in the matter, to which tax rates are assigned. Which fees accrue in detail depends on the services provided by the lawyer. It is in principle permissible to agree a higher remuneration. A lower remuneration can only be agreed in out-of-court matters. The previous regulation did not provide a ceiling for the amount involved, and thus for the amount of the statutory remuneration, whereas the Lawyers’ Remuneration Act, which is applicable now, does provide a limitation. Pursuant to § 22.2 RVG, the maximum amount involved is EUR 30 million; if there are several clients, the total maximum amount involved is EUR 100 million. Thus one fee amounts to a maximum of EUR 91,496 if there is one client. This means that if action is brought before the civil courts, the maximum net fee is EUR 228,740 in the first instance, with a rate of 1.3 for the proceedings fee and a rate of 1.2 for the court hearing fee. According to the previous law, however, in an action before the civil courts with a value in dispute of for instance EUR 50 million, the net remuneration was EUR 302,992; if the value in dispute was EUR 200 million, the net remuneration was EUR 1,202,992.

The constitutional complaints lodged against the statutory ceiling by a professional partnership of lawyers and a law firm were unsuccessful. The limitation of the statutory fees for lawyers in the case of disputes with particularly high amounts involved is compatible with the Basic Law; in particular, it does not violate the fundamental right of occupational freedom. This was decided by the First Senate of the Federal Constitutional Court.

The decision was reached by a majority of 7 votes to 1. Judge Gaier has attached a dissenting opinion to the decision.

In essence, the decision is based on the following considerations:

1. The challenged change of the existing system of lawyers’ fees by the introduction of value limits for the determination of the statutory remuneration is neither an encroachment on occupational freedom nor a measure whose effect is equivalent to an encroachment.

By providing, in a generalising manner, flat-rate remunerations for all services provided by a lawyer, the statutory regulation on remuneration serves to protect the persons seeking justice. The statutory fees provide those seeking justice with legal certainty as regards the calculation of possible costs. The statutory regulation defines typical facts and thus does not ensure in each individual case that the fee exactly corresponds to the value and the extent of the lawyer’s services. What is decisive in this context is the legislative objective of making it possible for lawyers to obtain, all in all, an adequate remuneration for their services. Over and above this, the lawyer is, in principle, free to conclude an agreement on fees. Therefore the statutory regulation on fees only has an optional effect in this respect.

The new regulation has not fundamentally changed this legal situation. The principle of the freedom of contract remains unaffected. The fact that potential clients will possibly prefer to call on the services of a lawyer if the statutory fee is applied does not contradict the principle of freedom of contract. If the lawyer does not succeed in agreeing a higher fee, the general risk will realise which goes along with the economic exploitation in the market of a professional service rendered. The previous regulation on fees, which provided higher fees above the value ceiling and thus offered less incentive for lawyers to conclude agreements on fees, did not create a situation in which the protection of public confidence could be relied on, and it did not relieve the lawyers from the risk of a failure of fee negotiations with the effect that a change in the incentive structure created by statute would have to be regarded as an encroachment on a fundamental right or as a measure whose effect is equivalent to an encroachment.

It also cannot be assumed that the optional determination of fees above the value ceiling for major proceedings makes it so difficult to reach an agreement on fees that this constitutes an impairment of occupational freedom. In the major proceedings that are relevant in the case in hand, the absolute amount of the lawyers’ remuneration in relation to the absolute value of the matter in dispute is generally not of decisive significance from the perspective of the parties to the dispute as regards their willingness to take legal action. Accordingly, the parties’ interest in competent legal counsel, which, as the case may be, will be rendered by a majority of specialised lawyers, will in many cases be so strong that they will be willing to pay fees agreed for this.

2. Even if an encroachment or – as Judge Gaier argues in his dissenting opinion – an impairment of occupational freedom that is equivalent to an encroachment had to be assumed, the new statutory regulation is constitutionally unobjectionable. The challenged provisions comply with the principle of proportionality. The aim of the challenged regulation, which is orientated towards ensuring the proper functioning of the administration of justice, is to avoid, in the interest of effective legal protection, disproportionately high fees being incurred in the case of high values in dispute. Over and above this, the regulation of statutory fees for the services of lawyers, in particular the determination of a minimum fee, below which an agreement on fees may not fall, also serves the protection of the economic interests of the legal profession. When weighing the advantages and disadvantages to the respective legal interests affected – to those of the lawyers on the one hand and to those of the persons seeking justice on the other hand – the fact that by the amended regulation on fees, the legislature has made recourse to a court easier (thereby increasing the protection of the citizens seeking justice without denying lawyers appropriate fees) does not meet with any constitutional objections. Nothing is apparent to justify the assumption that the limitation to fees that arise with a value in dispute of EUR 30 million denies lawyers a remuneration which is commensurate to their services and that, if their expense requires a higher remuneration, it is, in principle, not possible to secure it by an agreement on fees.

Dissenting opinion of Judge Gaier

Judge Gaier holds the view that the statutory regulation constitutes an impairment of occupational freedom that is equivalent to an encroachment. He puts forward that it prevents the members of the legal profession from fixing their remuneration under the freedom of contract. He further argues as follows: The possibility of agreeing a higher remuneration than the statutory one does not decisively change this; for the regulation of the statutory fees weakens the lawyers’ position in negotiations on fee agreements in particular because in litigation, only the statutory fees and not a higher remuneration agreed are to be reimbursed. Over and above this, the limitation of the statutory remuneration of lawyers does not comply with the principle of proportionality. An appropriate balancing between the conflicting interests of lawyers and clients is missing. The regulation one-sidedly burdens the lawyers affected because a remuneration that covers costs is not guaranteed especially in expensive and lengthy proceedings with extremely high values in dispute. By their services, lawyers subsidise action being brought by economically powerful clients, and in particular by large enterprises, while the great mass of those seeking justice is burdened with a cost risk that is considerably higher in comparison. An adequate balancing between the interests of those seeking justice and the lawyers’ interests can only be achieved by a fee structure without a ceiling, which, however, must result in considerably lower fees with high values in dispute than was the case under the previous legislation.