Legal Village

German revolutionaries

Posted 5/10/2007 by Christoph von Teichman

It was Vladimir Ilyich Lenin, that famous Russian lawyer (although in his later years he didn't practise much), who said that before storming a train station, German revolutionaries would first buy a platform ticket. 

Nowadays there are no platform tickets any more, but German revolutionaries have found other ways to ensure they go about their business in an orderly fashion. One such way is to apply to the Bundesverfassungsgericht, the Federal Constitutional Court. This court, unique among institutions in Germany, has the power not only to overrule every other court in the land on constitutional grounds but also to set aside laws and regulations promulgated by the German Federal Parliament as being unconstitutional. And it has done so repeatedly in matters affecting the legal profession, thereby contributing more to its liberalisation (I am tempted to say: liberation) than anyone else, including the members of the profession themselves and their elected representatives.

The most recent example of this is a decision by the court striking down an age-old rule that prohibits all agreements for success-related or contingency fees. This, the court argued, represented an unnecessarily broad restriction on the freedom of professional activities guaranteed by the German constitution. While there were legitimate reasons that could justify such a prohibition, the current rule went too far in that it allowed for no exceptions, specifically in cases where a client would be denied access to justice if compelled to pay normal legal fees irrespective of the outcome of the litigation.

For technical reasons the court could not, as it otherwise usually does, declare the prohibition void with immediate effect: this would have meant that there would be no limits whatsoever to success and contingency fee arrangements until a new, constitutionally acceptable rule was introduced, and the court felt that this would be undesirable given the legitimate core of a prohibition against such arrangements. Instead parliament was given time until the middle of next year to put a new rule on the statute book. The slightly absurd consequence of this technicality is that the lawyer who brought the case to the court in the first place (because he had been censured by the bar association for having agreed to a contingency fee) prevailed on the merits, but the court let his censure stand nonetheless because the rule he had breached, while unconstitutional, remained valid. Talk about a pyrrhic victory!

The decision has prompted a lively public debate - not because of the narrow ground it covers but because of certain statements by the court in its reasons that went beyond the case of the indigent client denied access to justice. The court makes it plain that while certain restrictions on success and contingency fees are acceptable from the point of view of the constitution, they are by no means mandated by it. In other words, parliament has broad discretion in dealing with the issue; it could allow just the one exception that was the subject of the court's decision or it could relax restrictions much further. The question being debated is: how far?

Unsurprisingly the Bundesrechtsanwaltskammer, the Federal Bar Association, has come out squarely in favor of the narrowest possible exception, limiting the admissibility of success or contingency fees to the type of case decided by the Federal Constitutional Court where a client could otherwise not pursue his or her claim. The Deutscher Anwaltverein (German Lawyers' Association) is lobbying for a similar approach. So far the government has not let on what it is going to propose to parliament.

Is this a revolution in the making or a damp squib? Chances are the outcome of the legislative process will be some sort of a compromise, half-hearted if not half-baked, with lots of detailed provisions aimed at protecting the integrity of the legal system against the dire consequences of untrammeled success fees. And that would be a pity. Not that I think success fees are necessarily a good thing - but neither are state regulations of legal fees.

The recently revamped German Code on Lawyers' Fees still uses the term Gebühr - otherwise reserved for charges imposed by institutions of the state. A Gebühr is what you pay when you apply for a new passport - and, while considerably (and commendably) liberalising the entire fee system, is still based on the notion that legal fees cannot be left entirely to the marketplace and that the population must be protected against unfair or unethical treatment at the hands of unscrupulous advocates. This attitude is not limited to legal fees - doctors, architects and other members of the professions are similarly regulated.

I think it is about time these remnants of the feudal state were scrapped, and if the current debate about success fees should turn out to be the thin end of the wedge it would have served a useful purpose.