Attorney fees under German law: a courtesy summary for English speakers and/or expats living in Germany

Attorney fees under German law: a courtesy summary for English speakers and/or expats living in Germany

As discussed in a prior post, in the USA, hourly fees are the sector standard for billing legal services. This system is extended or, as it may be, augmented by contingency fees for clients whose potential pay-outs are so large that the attorney can accept the business risk of a negative verdict or a failure to settle. On the other end of the spectrum, we have Germany, which has statutory fees based on the value in dispute in a given case. The statutory fees are the norm, and a specific legal provision (§ 3 a RVG) opens the way for fee agreements.

In contrast to the U.S. system, the German legal fees also provide a floor. In spite of § 3 a RVG, no attorney is permitted to agree on fees which are lower than the statutory fees, § 49 b BRAO.

Typically, the attorney's compensation under the statutory fees will generally be somewhere in the range of 1-20% of the overall value of the disputed matter. For example: if EUR 5.000,00 are disputed and a settlement is reached, the attorney will receive EUR 1.033,40 including tax (just over 20%), whilst if 100.000,00 are disputed and a settlement is reached, the attorney will receive EUR 5.031,80, or roughly 5%. The greater the amount, the less (in absolute terms) the attorney will receive for legal counsel and representation.

Of course, "low value" and "high value" cases will frequently be roughly the same in terms of their legal and factual complexity. Thus, the attorney will need to spend a roughly equivalent amount of time, energy and effort to resolve the two, whilst the fees he earns under the German system will be considerably lower for the "low value" case. More on this shortly.

Pro bono work is now, finally and since 2008, once again possible under the Rechtsdienstleistungesetz (RDG), reversing the 1935 National Socialist law (the "Rechtsberatungsgesetz") which specifically targeted Jews who, having been banned from practicing for money, still tried to privately give advice free of charge. § 6 RDG also permits a German attorney to waive fees for friends, neighbors or relatives whilst § 7 (1) RDG ensures that attorneys working through public interest groups and religious associations, § 8 (1) Nr. 5 RDG, do not need to charge the members of that entity. Moreover, pursuant to § 49 b (1) BRAO, it is possible in Germany for an attorney to release a client from the payment of fees in exceptional cases, particularly when the client is impoverished (and does not have recourse to public legal aid, like in Hamburg). This is a judgement call that the attorney has to make, since it requires the attorney to evaluate the financial situation and standing of the client.

For Americans coming to Germany, understanding the system is less intuitive than an hourly fee of a certain number of euros or dollars. All one has to do with that is multiply by how long the attorney expects it will take to resolve the matter. But in the final result, the German system effectively creates a flat rate, adjusted based on the financial relevance of the case to the client (the greater the relevance, the greater the fee; the smaller the relevance, the smaller the fee). The legislature intentionally did this in order to make it possible for cases with more at stake to subsidize cases with less at stake, with the logic being that richer people will have cases with more at stake and poorer people cases with less at stake. After all, richer people rent more expensive houses and crash more expensive cars than poorer people.

For this reason, when attorneys opt out of the statutory fees in favor of hourly fee agreements for clients with large cases, it undermines this cross-subsidization and indirectly punishes either poorer clients, who end up paying the attorney's full hourly rate in spite of their financial situation or, sadly, not receiving help, or it hurts the attorney, who loses income and ends up working long hours for little compensation for "low value" legal conflicts. I know that most German attorneys will take on legal aid and "low value" cases with admirable professional stoicism and that the quality of counsel and representation provided is not in any way inferior.

For out of court counsel and representation, moreover, § 34 RVG states that the German attorney "should" work toward a retainer agreement with the client, whether it be on the basis of an hourly fee or a flat rate, whilst simultaneously protecting consumers through a cap on fees for either verbal (EUR 190.00 plus tax) or written counsel (EUR 250.00 plus tax and flat rate expenses of EUR 20.00 for postage, telecommunication and supplies). This cap does not, however, apply when representation (e.g. writing someone a letter) is involved in addition to counsel.

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