Fri, Mar. 16, 2007

Contingency Fee Ruling

CK - Washington.   On March 8, 2007, the federal constitutional Supreme Court in Karlruhe rendered a landmark decision loosening the restrictions on contingency fees. Such fees have been legal only in very limited circumstances, usually involving certain claims pursued on behalf of certain foreign clients in limited circumstances. Now, the court opens the door by instructing the legislative to reconsider its restrictions in light of constitutional balancing requirements.

Anthony K. Sebok analyzes the decision in the matter 1 BR 2576/04, see press release 27/2007 of March 7, 2007, in his English-language note How an Important German Constitutional Court Decision May Change the Nature of Law Practice in Germany of March 13, 2007.

Sebok's article also introduces the fairly new system of third party financing of litigation in Germany. After the fall of the Wall and riches to be recovered from East German and Nazi expropriations, contingency fees crept into legal work done on behalf of foreign claimants under the restitution laws. There is good empirical evidence of abusively high contingency fees where a few bad apples among German lawyers and non-lawyers alike believed reports of extravagant American legal fees--whether or not those were legal--and agreed to, or demanded, fees far in excess of 30% to recover expropriated properties. Clearly, a change in the law needs to go with a good bit of education in professional ethics.

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