Abstract
This General Report provides a comparative study of the principles and rules governing costs and fees in civil litigation. It is based on the General Report written for the XVIIIth World Congress of Comparative Law held in Washington D.C. in the summer of 2010. It is thus draws heavily (albeit by no means exclusively, see infra Section 1.1.4) on the respective National Reports contributed to this Congress Most, though not all, National Reporters also contributed chapters to this book.
Thanks to Sarah Bullard (J.D. University of Michigan 2010) and Alexander Fiedler (LL.M. University of Michigan 2011) for effective research assistance and to my colleagues Jody Kraus, Kyle Logue, and Mark West for helpful comments on an earlier draft.
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Notes
- 1.
The General Report is published in Karen B. Brown and David Snyder (eds.), General Reports of the XVIIIth Congress of the International Academy of Comparative Law (2011). National Reports on Cost and Fee allocation in Civil Procedure were written by Camille Cameron (Australia), Marianne Roth (Austria), Ilse Samoy and Vincent Sagaert (Belgium), Silvia Julio Bueno de Miranda and Alexandre Alcino de Barros (Brasil), Patrick Glenn (Canada), Tang Xin and Xiao Jianguo (PR China), Jan Hurdik (Czech Republic), Richard Moorhead (England and Wales), Jarkko Männistö (Finland), Sophie Gjidara-Decaix (France), Burkhard Hess and Rudolf Hübner (Germany), Kalliopi Makridou (Greece), Thorgerdur Erlendsdottir and Sigridur Ingvarsdottir (Iceland), Neela Badami (India), Talia Fisher and Issi Rosen-Zvi (Israel), Alessandra Luca (Italy), Manabu Wagatsuma (Japan), Gyooho Lee (Korea), Candida Silva Autunes Pires (Macau SAR, PRC) Carlos Sanchez-Mejorada (Mexico), Marco Loos (Netherlands), Anna Nylund (Norway), Andrzej Jakubecki (Poland), Alena Zaytseva (Russian Federation), Greg Gordon (Scotland), Marko Knezevic (Serbia), Nina Betetto (Slovenia), HJ Erasmus (South Africa), José Angel Torres Lana and Francisco Lopez Simo (Spain), Martin Sunnqvist (Sweden), Caspar Zellweger (Switzerland), Fu-mei Sung and Taisan Chiu (Taiwan), Ayse Saadet Arikan (Turkey), James Maxeiner (United States), and José Tadeo Martinez (Venezuela).
- 2.
Infra Section 1.3.4.
- 3.
See Stefan Vogenauer, Perceptions of Civil Justice Systems in Europe and their Implications for Choice of Forum and Choice of Contract Law: an Empirical Analysis, in Stefan Vogenauer and Christopher Hodges (eds.), Civil Justice Systems in Europe: Implications for Choice of Forum and Choice of Contract Law (Oxford 2011, forthcoming).
- 4.
Assuming a choice, it would be an egregious mistake, for example, to file a clear winner in a jurisdiction where each party bears its own costs as opposed to a jurisdiction where the loser has to make the winner whole. In a similar vein, it would be a bad move to file a weak case (perhaps with a view of extracting a settlement) in a jurisdiction where the losing party pays all the costs rather than in system without cost shifting.
- 5.
See infra note 9.
- 6.
A major exception was Charles Platto, Economic Consequences of Litigation Worldwide (London: International Bar Association, The Hague, Boston 1999). The book provides valuable data about 20 systems (or regions) some of which were included in writing this General Report. The main problem with the book is that much of the information it provides has already become dated.
- 7.
Christopher Hodges, Stefan Vogenauer and Magdalena Tulibacka, Costs and Funding of Civil Litigation: A Comparative Perspective (Oxford and Portland/Oregon 2010) (hereafter cited as Oxford: Costs and Funding). While the book contains only 23 National Reports, the original Study conducted at the University of Oxford included 34 countries, see Christopher Hodges, Stefan Vogenauer and Magdalena Tulibacka, Costs and Funding of Civil Litigation: A Comparative Study, University of Oxford Legal Research Paper Series Paper No. 55/2009 (December 2009), available at http://ssrn.com/abstract=1511714 (hereafter cited as Oxford: Comparative Study). These countries overlap considerably with the jurisdictions covered in this chapter but each project also considers many jurisdictions not addressed by the other. The Oxford Study encompassed eleven systems not considered here: Bulgaria, Denmark, Estonia, Hong Kong, Hungary, Ireland, Latvia, Lithuania, Portugal, Romania, and Singapore; conversely, this General Report includes twelve systems not addressed by the Oxford Study: Brazil, Iceland, India, Israel, Korea, Macao, Mexico, Serbia, Slovenia, South Africa, Turkey, and Venezuela. Together the two projects thus draw on a total of 46 jurisdictions. The Oxford Study and the present chapter also overlap with regard to the questions they pursue but again, there is enough difference in coverage and thrust for one to complement the other. Overall, the focus of this General Report is somewhat narrower because it deals principally with the allocation of costs while the Oxford Study is concerned with Costs and Funding of Civil Litigation more broadly.
- 8.
See especially European Commission for the Efficiency of Justice (CEPEJ), European Judicial Systems: Edition 2006 (2004 data) and European Judicial Systems: Edition 2008 (2006 data) – Efficiency and Quality of Justice (2008); and Jean Albert, Study on the Transparency of Costs of Civil Proceedings in the European Union: Final Report (2007).
- 9.
Rupert Jackson, Review of Civil Litigation Costs, Final Report (Norwich 2010) (hereafter cited as Jackson Review).
- 10.
Peter Gottwald (ed.), Litigation in England and Germany (Bielefeld 2010).
- 11.
Dominique Menard, The Costs Battle: Cost Awards in France after the Enforcement Directive, Patent World 173 (2005) 13–15.
- 12.
Gottwald, supra note. 10; Gerhard Wagner, Litigation Costs and Their Recovery: The German Experience, Civil Justice Quarterly 28 (2009) 367–366.
- 13.
Matthew Wilson, Failed Attempt to Undermine the Third Wave: Attorney Fee Shifting Movement in Japan, Emory International Law Review 19 (2005) 1457–1488.
- 14.
See Markus Jäger, Reimbursement for Attorney’s Fees. A Comparative Study of the Laws of Switzerland, Germany, France, England and the United States of America; International Arbitration Rules and the United Nations Convention on Contracts for the International Sale of Goods (CISG) (2010); David Root, Attorney Fee-shifting in America: Comparing, Contrasting, and Combining the “American Rule” and “English Rule”, Indiana International & Comparative Law Review 15 (2005) 583–617; see also Andrew Cannon, Designing Cost Policies to Provide Sufficient Access to Lower Courts. Australia/German/Netherlands/Northern Ireland/England, Civil Justice Quarterly 21 (2002) 198–253; Francesco Parisi, Rent-Seeking through Litigation: Adversarial and Inquisitorial Systems Compared, International Review of Law and Economics 22 (2002), 193–216.
- 15.
Teltronic-CATV v. Poland (ECHR 10 Jan. 2006, Application no. 48140/00); DEB v. Germany (European Court of Justice, 22 Dec. 2010, C-279/09); see also Granos Organicos Nacionales v. Germany (European Court of Human Rights, Application 19508/07 – not decided on the merits), and Kottke v. Präsidial Anstalt and Seetly Stiftung (EFTA Court 17 Dec. 2010, E-5/10, concerning security for litigation costs before national courts).
- 16.
See infra Section 1.4.1.1.
- 17.
Australia, Austria, Belgium, Brazil, Canada, PR China, Czech Republic, England and Wales, Finland, France, Germany, Greece, Iceland, India, Israel, Italy, Japan, Korea, Macau (SAR PRC), Mexico, The Netherlands, Norway, Poland, Russian Federation, Scotland, Serbia, Slovenia, South Africa, Spain, Sweden, Switzerland, Taiwan, Turkey, United States of America, and Venezuela. These Reports are on file with the General Reporter; they are accessible, together with the Questionnaire, under http://www-personal.umich.edu/~purzel/national_reports/. With a few exceptions, this study does not provide pinpoint citations to the National Reports.
- 18.
Information on four additional jurisdictions, for which I had no National Report, was drawn from Platto, supra note 6, i.e., on Hong Kong, Denmark, New Zealand, Singapore. Since Portugal enacted major reforms in 2008, I also occasionally drew on the Portuguese Reports obtained by the Oxford group, supra note 7, from Barrocas Sarmento Neves, Sociedade de Advogados (Lisboa), available at http://www.csls.ox.ac.uk/documents/PORTUGAL.doc [cited as Oxford Portuguese Report/Barrocas] and from Henrique Sousa Antunes [cited as Oxford Portuguese Report/Antunes], available at http://www.csls.ox.ac.uk/documents/PORTUGALAC.doc. These additional five jurisdictions bring the number of systems considered to a total of 40.
- 19.
In terms of per capita GDP, no country covered belongs to the poorer half of the world.
- 20.
Other available studies do not remedy this problem because they suffer from exactly the same limitations.
- 21.
Throughout this study, these terms – costs, fees, and expenses – are used consistently to refer to courts, attorneys, and evidence taking respectively. They are not, however, fixed terms of art, and many National Reports and studies use them differently, e.g., in the sense of “court fees”, “costs of evidence” or “expenses of legal representation”.
- 22.
A separate question not pursued here is how much of the actual expenses are borne by the parties and how much is paid by the state (i.e., the taxpayer), but see infra Section 1.3.1.3. This essay does not address cost and fee allocation in arbitration proceedings; for an analysis and discussion, see Jäger, supra note 14, 75–145.
- 23.
See, e.g., Jäger, supra note 14, at 1.
- 24.
“Arguably” because while they may also charge the loser only for court costs, these costs may be substantially higher than in the United States and constitute a larger percentage of the overall litigation expenses; see infra Section 1.3.1.2.
- 25.
It is a separate question, of course, whether these categories and impositions amount to a lot or relatively modest amounts of money, i.e., whether shifting costs the loser little or dearly. That depends on how high court costs, attorney fees, expenses of evidence taking, etc. are; see infra Section 1.3.
- 26.
Where the winning party (normally the plaintiff) has advanced these costs (such as filing fees), they must be reimbursed by the loser.
- 27.
The characterization of the Netherlands as a member of the “Germanic” family of European legal systems is debatable, of course.
- 28.
Platto, supra note 6, 144.
- 29.
The membership of Greece in this group is doubtful, see infra note 39 and text.
- 30.
Platto, supra note 6, 82–83.
- 31.
In Mexico, as a general matter, attorney fees are shifted to the loser in civil disputes, but not in commercial cases.
- 32.
Regulation (EC) No. 861/2007 of the European Parliament and of the Council of 11 July 2007 establishing a European Small Claims Procedure [2007] OJ L 199/1, Recital 29; the costs recoverable by the winner must, however, be “proportionate to the value of the claim” and “necessarily incurred”, id.
- 33.
The results of the Oxford group research support this; see Oxford: Costs and Funding, supra note 7, [72], [20]; Oxford: Comparative Study, supra note 7, II.8, III.65 (regarding lawyers fees), III.81 (recoverability gaps in various systems).
- 34.
These tariffs are usually tied to the amount in controversy and then employ a multiplier reflecting various procedural acts or stages. As pointed out by the National Reporter for Italy in her comments on the Draft General Report, tying attorney fees to the procedural stage (as in Germany) instead of to concrete procedural acts (as in Italy) leads to greater predictability because the number of procedural acts within each state may vary from case to case.
- 35.
The tariff is usually degressive, i.e., a lower percentage for higher amounts.
- 36.
In some countries (e.g., Belgium, Italy, and Poland), the attorney fee schedule provides a (minimum-maximum) range within which the actual fee must be set, sometimes complemented by a standard fee (as in Belgium).
- 37.
This, however, requires a “flawless victory” (on all counts) which is not easy to achieve in practice, Venezuelan Report I.1.
- 38.
In some jurisdictions, the victorious party even has a claim for its own work and other losses related to the litigation (Finland) while such items are not included in most other systems.
- 39.
Greek Report I.1. Yet, under the new statutory rules (2011), the official tariff applies only by default. If there is a written agreement between lawyer and client, it determines the fee that will be shifted, subject to reasonability control by the court.
- 40.
Portugal also limits the recoverable attorney fees to a percentage but pegs it to the “justice fee” (the official court, evidence, etc. costs). Article 41 sec. 1 of the 2008 Portuguese Legal Costs Act limits the shiftable attorney fees to between 10 and 25% of the “justice fee”, leaving the precise determination to the discretion of the court, see Oxford Portuguese Report/Barrocas, Attachment I. Even if the “justice fee” is substantial, it is hard to imagine that such an amount would be anywhere close to the actual attorney fees in serious cases. This suggests that Portugal shifts only a very limited part of these fees to the loser and should thus not be considered a system with “major shifting”.
- 41.
Platto, supra note 6, 106.
- 42.
In England and Wales, Civil Procedure Rule 44.1 contains a long list of factors for courts to take into account. There are two kinds of cost shifting: on a “standard basis” which is subject to a proportionality test and usually results in merely partial allocation against the loser, and on an “indemnity basis” which usually amounts to (virtually) full reimbursement. The former is considered the rule, the latter the exception.
- 43.
In England, this is typical for cost shifting on a “standard cost” basis. The courts can hold the losing party fully responsible for the winner’s costs but will do so only for special reasons, as under the English principle of “indemnity cost”; see Neil Andrews, Costs and Conditional Fee Agreements in English Civil Litigation, in Gottwald, supra note 10, 185 at 197–198.
- 44.
The Australian Report estimated that normally, only about 50–60% of the costs will be shifted to the loser in most Australian jurisdictions. The Oxford group mentions “recoverability gaps” of 30–45% for Australia, 25% for Canada, England and Wales, and 33–50% for Scotland (and Singapore), Oxford: Costs and Funding, supra note 7, [20]; Oxford: Comparative Study, supra note 7, III.81. Yet, these figures must also be understood as very rough approximations. Note, however, that the National Reporter for the United Kingdom commented that de facto, in England and Wales, cost shifting is normally total.
- 45.
Code of Civil Procedure sec. 35; see Neela Badami, Shifting Sands and Pyrrhic Victories (Section 13.3), Chapter 13, this volume.
- 46.
Usually 10% of the damages recovered, Japanese Report II.1.
- 47.
One could thus be tempted to group Korea with the British Commonwealth countries but that would overlook an important difference: contrary to the British tradition, Korea does not leave the amount of recoverable attorney fees to judicial discretion but rather determines it – very much in the civil law style – ex ante through an official tariff (setting an exact, and degressive, percentage).
- 48.
For a more detailed account, see Jäger, supra note 14, 29–37.
- 49.
Such as service of process, taking of evidence, translation of documents, etc. The basic court fees, i.e., the fees for just filing the case itself, are extremely low in France.
- 50.
There are no court fees in Mexico because free access to justice is considered a constitutional right.
- 51.
The Oxford group concludes that this principle “is best explained by the critical role it plays in enabling the ‘private enforcement’ of law” in the interest of “wider public regulatory and observance goals”, see Oxford: Costs and Funding, supra note 7, [79]; Oxford: Comparative Study, supra note 7, III.90. The US-American National Report solicited for this General Report does not support this explanation as a major factor, and it is doubtful indeed that this consideration is at the heart of the matter. In most areas in which “private attorney generals” play a significant role, such as antitrust, civil rights or environmental disputes, specific statutes deviate from the “American rule” and allow (one-way) cost shifting, see immediately infra.
- 52.
Still, the Oxford Study, supra note 7, perhaps overlooks court fee shifting when it states that the United States system “does not include cost shifting”, at II.8.
- 53.
Of course, lawyer fees are in large part generated by the extensive discovery common in many cases in the United States, but evidence gathering also entails other expenses, e.g., for hiring expert witnesses, paying stenographers for depositions, or copying (and perhaps translating) massive amounts of documents.
- 54.
United States Report II.A., citing John F. Vargo, The American Rule of Attorney Fee Allocation: The Injured Person’s Access to Justice, American University Law Review 42 (1993) 1567, at 1629.
- 55.
For details, see Jäger, supra note 14, 51–60. Permitting “qualified one-way costs shifting” has recently also been proposed for England and Wales, see Jackson Review, supra note 9, xvii.
- 56.
Susanne diPietro and Teresa W. Carns, Alaska’s English Rule: Attorney Fee Shifting in Civil Cases, Alaska Law Review 13 (1986) 33.
- 57.
For further details, see Jäger, supra note 14, 6–18.
- 58.
In a similar vein, victorious plaintiffs acting in the public interest can sometimes recover their litigation expenses while other plaintiffs cannot, see supra Section 1.2.1.3.
- 59.
Jackson Review, supra note 9, 184–193
- 60.
In civil law jurisdictions, these sanctions tend to be spelled out in statutory form (codes of civil procedure) while in common law systems, they are often a matter of judicial practice when exercising discretion with regard to cost shifting. In US federal courts, Federal Rule of Civil Procedure 11 also allows (cost and other sanctions) to be imposed upon both counsel and parties for improper procedural action.
- 61.
See also Oxford: Costs and Funding, supra note 7, [18]; Oxford: Comparative Study, supra note 7, III.75. Venezuela is an exception: cost shifting requires flawless victory. In other words, even losing a small part of the case completely bars any cost recovery in a manner reminiscent of the (now largely defunct) defense of contributory negligence in tort cases.
- 62.
Some systems (Brazil, Greece, Macau) provide for equal division of costs which would imply that the party with the higher bill can claim part of its costs from the other side.
- 63.
The National Reports for Australia, Canada, England and Wales, and the United States all indicate settlements rates of at least 90%; the Oxford group confirms that, see Oxford: Costs and Funding, supra note 7, [94–95]; Oxford: Comparative Study, supra note 7, IV.166. The situation in the mixed jurisdictions of Israel and Scotland is similar. The big exception in the common law orbit is India where settlement rates are apparently low. This may be due to the excessive delays in civil proceedings: if a decision cannot be expected for many years down the road, at least the party in the weaker position has little reason to give in by settling.
- 64.
The information about settlement rates contained in the National Reports was generally patchy. Many Reports did not provide any data for lack of statistical information; some National Reporters proffered good faith estimates while a few others referred to hard data. In a few countries, such as Russia and Turkey, by far most cases go to final judgment. More typically, settlement rates of ca. 15–20% prevail, as in Austria, Germany, Iceland, Norway, or Serbia. Some National Reporters provided much higher numbers, as for China (50–70%), Japan (20–42%) or Switzerland (ca. 50% of all cases with a higher rate in commercial litigation). These numbers roughly match the data provided by the Oxford group, see Oxford: Costs and Funding, supra note 7, [94–95]; Oxford: Comparative Study, supra note 7, IV.165 (with the exception of Norway for which a settlement rate of 42% is reported).
- 65.
The Oxford group reaches the same conclusion, see Oxford: Costs and Funding, supra note 7, [73]; Oxford: Comparative Study, supra note 7, IV.123.
- 66.
Only the Reports for Norway and South Africa disclaim such instrumentalist grounds. The Reports for India and Switzerland state that there is no unified or clearly articulated policy.
- 67.
This is reflected in the National Reports for Austria, Australia, Brazil, Canada, England and Wales, Germany, Greece, Israel, Japan, Korea, Macau, the Netherlands, Norway, Scotland, Sweden, and Venezuela; it is implicit in several others.
- 68.
All losing plaintiffs were (virtually by definition) over-optimistic and thus potentially encouraged, rather than discouraged, by the loser-pays role to file a suit which was then proven non-meritorious. Of course, the loser-pays rule will deter litigation if a party recognizes the weakness of the claim.
- 69.
This is mentioned in the National Report for Germany and intimated in several others emphasizing that the winner deserves to be fully compensated for the vindication of his or her rights.
- 70.
A few National Reports (especially for Austria, China, and Taiwan) also state that their cost rules are designed to encourage settlement. The loser-pays rule seems ill-designed to do that, except to the extent that it, again, appeals to the parties’ risk-averseness. Systems can, and sometimes do, encourage settlement through special cost rules. Some punish a party that refuses to settle, e.g., by imposing the resultant litigation costs, as in Scotland under certain circumstances (if the defender lodges a judicial tender, offering to settle at a certain amount, and the pursuer continues the case and is ultimately awarded less than the defender offered). Others reward parties who do settle, e.g., by waiving part of the court fees, as in Portugal.
- 71.
That is not to say that it is impossible to make fairness arguments in defense of the “American rule”. The most obvious such argument is that in many, if not most, cases, litigation outcomes are so unpredictable and luck-driven that both sides run a high risk of defeat which makes it fair for each side to bear its own cost. Another argument is that the American rule makes it each side’s own business how much money to spend on the litigation. Whether these arguments are ultimately persuasive is of course a matter on which reasonable people can differ.
- 72.
In his comment on the Draft General Report, the National Reporter for the United States pointed out that “the instrumentalist view in the USA is an after-the-fact justification. It came into being only well-after the practice was established.”
- 73.
This fits with the usually very low court fees in the United States, see infra Section 1.3.1.2.
- 74.
Such cases are routinely settled; the impossibility of cost-effective litigation normally enhances the bargaining power of defendants and thus tends to lower the price of settlement.
- 75.
See the tables in the United States Report, VII.
- 76.
See also Oxford: Costs and Funding, supra note 7, [13]; Oxford: Comparative Study, supra note 7, III.25.
- 77.
This has the effect, inter alia, that there is no penalty in terms of court costs for filing a grossly inflated claim which explains, in part, why US plaintiffs often file million dollar lawsuits where parties in other countries would be much more careful not to overstate their claim.
- 78.
At least in the United States, it is often not worth the time and effort to try to collect the costs from the losing party.
- 79.
Where court costs are substantial and tied to the amount claimed, parties sometimes save part of them by claiming only part of the amount really at issue, thus filing essentially a test case. This can also be done to save lawyer fees where they are determined by a schedule as well.
- 80.
Teltronic-CATV v. Poland, ECHR 10 Jan. 2006 (Application no. 48140/99).
- 81.
See the classic article by John Langbein, The German Advantage in Civil Procedure, 52 Chicago Law Review 823 (1985).
- 82.
Again, this assumes that the respective approaches to calculation were truly equivalent. In their comment on the Draft General Report, the Chinese Reporters, for example, pointed out that they counted “nearly every cent that is spent by both parties during the first instance, second instance, and enforcement procedure.”
- 83.
See Oxford: Costs and Funding, supra note 7, [13]; Oxford: Comparative Study, supra note 7, III.26 (80% of court costs covered by user payments); John Peysner, Litigation Cost Recovery – Tariffs and Hourly Fees in England, in Gottwald, supra note 10, 138 fn. 4; the Jackson Review, supra note 9, recommends to abolish this policy and to fund the courts (largely) through taxpayer money so that the court fees can be lowered and access to justice facilitated, id., 50.
- 84.
As the National Reporter for Japan pointed out in his comments on the Draft General Report, in cases with particularly large amounts at stake (such as some tort cases for environmental damage or HIV-infected blood products), Japanese court costs can rise to the level of a barrier to access to justice because they are tied to the amount in controversy.
- 85.
- 86.
Note that this is not true for all of continental Europe because many jurisdictions there do not have an official attorney fee schedule, such as France, Spain, and the Scandinavian countries. On the other hand, there is apparently such a schedule in South Africa.
- 87.
For data on hourly fees in various jurisdictions, see Oxford: Comparative Study, supra note 7, Appendix III.
- 88.
See infra Section 1.3.4.
- 89.
See Swiss Report IV.2.
- 90.
There are signs of an incipient counter-trend in England: certain routine cases are handled under a fixed fee, and the recent reform proposals include the introduction of fixed costs in fast track litigation, i.e., cases of up to 25,000 pounds in which trial can be handled in one day, see Jackson Review, supra note 9, xviii, 146–168.
- 91.
See infra Section 1.4.4.
- 92.
Jackson Review, supra note 9, xviii–xix, 131–133.
- 93.
See Swiss Report IV.3.
- 94.
The Italian deregulation came in part as a reaction to decisions rendered by the European Court of Justice, although the Court did not declare official fee schedules a per se violation of European law (see Case C-35/99 (Arduino) [2002] E.C.R. I-1529-1575; Joined Cases C-94-04 (Cipolla) and C-202/04 (Macrino), [2006] E.C.R. I-11421-11478). For a comment, see Martin Ilmer, Lawyers’ Fees and Access to Justice – The Cipolla and Merino Judgment of the ECJ, 26 Civil Justice Quarterly 201 (2007).
- 95.
This was an important factor in Germany, Entscheidungen des Bundesverfassungsgerichts (BVerfGE) 117, 163–202 (2006).
- 96.
This was clearly the case in England, see United Kingdom, Lord Chancellor’s Department, Access to Justice with Conditional Fees (1998); Neil Andrews, Cost and Conditional Fee Agreements in English Civil Litigation, in Gottwald, supra note 10, 185 at 187.
- 97.
The bar has not necessarily welcomed increased competition through deregulation, see Ilmer, id., at 308 (Italian bar protesting); as the National Reporter for Italy points out in her comments on the Draft General Report, there are efforts to reverse this trend by legislation, and it is conceivable that a more regulated regime will be restored.
- 98.
German Report, Conclusion.
- 99.
Cf. L’Américanisation du droit, Archives de philosophie du droit 45 (2001) 7.
- 100.
For an informative discussion of the advantages and disadvantages of strictly regulated lawyer fees, see Gerhard Wagner, Litigation Costs Recovery – Tariffs and Hourly Fees in Germany, in Gottwald, supra note 10, 149, at 174–184.
- 101.
See supra note 39 and text; note, again, however, that under the most recent statutory amendments (2011), a written agreement between lawyer and client can override the statutory tariff and also determine the fee to be shifted (within limits).
- 102.
For England, see Martin Ilmer, Lawyer’s Fees and Access to Justice, Civil Justice Quarterly 26 [2007] 201, at 207(with further references). Zuckerman on Civil Procedure (2nd ed. London 2006) par. 26.1 et seq.
- 103.
In order to avoid these issues at least in part, England has introduced “fixed costs” for certain types of routine cases and for all fast track trials for under 15,000 pounds; see Oxford: Costs and Funding, supra note 7, [83 fn. 70]; Oxford: Comparative Study, supra fn. 7, IV.145 (incl. fn. 60).
- 104.
Particularly in England, (second stage) litigation about costs is so notorious and wide-spread that insiders often speak of a veritable “cost war”, see Richard Moorhead, Cost Wars in England and Wales: The Insurers Strike Back (Chapter 8, this volume); see also Andrews, supra note 90, at 204; Peysner, supra note 77, 140–141.
- 105.
- 106.
This is confirmed by the Oxford group, see Oxford: Costs and Funding, supra note 7, [107]; Oxford: Comparative Study, supra note 7, III.37. and 69.
- 107.
This is not because common lawyers are more expensive by the hour but because common law procedure is more party-driven and thus requires more lawyer time, see infra Section 1.5.2.
- 108.
This is expressly noted in the National Reports for China, Japan, and Korea.
- 109.
This does not necessarily mean that the loser actually bears a greater amount of these costs than in a civil law court. Remember that most civil law courts routinely shift the total amount while common law judges often choose to shift only a part of the winner’s litigation (including evidence taking) costs to the defeated party.
- 110.
See Federal Rule of Civil Procedure 54(d)(1).
- 111.
See 28 United States Code § 1920.
- 112.
Discovery is permissible not only with regard to evidence which is admissible at trial but also “if the discovery appears reasonably calculated to lead to the discovery of admissible evidence”, Federal Rule of Civil Procedure 26(b)(1); this provision thus permits so-called “fishing expeditions”.
- 113.
Under the discovery system in the United States, each side thus has the potential to inflict enormous costs on the other side which can usually not be shifted.
- 114.
In some systems, like France, Mexico, Serbia, and Russia, there are different courts, and sometimes different cost and cost allocation rules for private and commercial cases; in many other jurisdictions, such as Germany, Norway, and Sweden, family law disputes are subject to special rules and rates; and some systems, like Japan or the United States, treat cases for personal injury differently than, e.g., suits for breach of contract or injunctive relief.
- 115.
In schedule based-systems, these figures were usually fairly precise; in others, they were based on good faith estimates.
- 116.
While the National Reporters provided no figures for England and Wales nor for the United States, common experience suggests that in these systems, litigating a $1,000,000 claim could also cost hundreds of thousands of dollars although almost everything would depend on the kind and complexity of the case.
- 117.
The Oxford group also concluded “that in most states included in this study the costs of litigation are high in relation to the value of the case – sometimes they even exceed the value of the case,” Oxford: Costs and Funding, supra note 7, [71]; Oxford: Comparative Study, supra note 7, III.70.
- 118.
Many National Reports flag this problem; see the Reports for Austria, Brazil, Switzerland, the Czech Republic, Italy, Japan, Mexico, South Africa (at least in unusual or novel cases), Spain (especially in consumer litigation), and Turkey.
- 119.
Interestingly, all National Reports from common law systems (Australia, Canada, England and Wales, and the United States) and mixed jurisdictions (Israel, Scotland, and South Africa) mention this problem. By contrast, only some of the civil law based countries report this concern. This indicates that systems with a strong common law element struggle more consistently with cost issues than jurisdictions with a civil law foundation. Given the more lawyer-centered nature of court proceedings in common law (influenced) countries, litigation costs there tend to be higher and, perhaps just as importantly, less predictable, see infra Section 1.5.2.
- 120.
Of course, access to justice is not only a matter of money but depends on a variety of other factors as well. Still, financial costs are an important hurdle for most potential litigants. In some systems, like Italy and India, the main problem is not cost but excessive delay. It is a common maxim in English that “justice delayed is justice denied”, and if an injured party cannot enforce its claim through the legal process within a reasonable period of time, even free access to justice provides little help.
- 121.
Some are paid by the state, e.g., where court fees are so low that the judicial system must be heavily subsidized by tax payer money, as in the United States.
- 122.
We leave out here cost distribution by firms through the market to consumers of their services or products because this mechanism is used for virtually all firm costs and thus not particular to civil litigation expenses.
- 123.
In many systems, lawyers taking on public aid cases are paid only a (sometimes severely) reduced fee; it stands to reason that this will often affect the quality of legal representation.
- 124.
There is some – very limited – federal funding in support of legal aid efforts but no general public legal aid system. The Oxford group’s statement that such a system is not necessary in light of the availability of contingency fees (for indigent parties), is largely (though not completely) untrue, Oxford: Costs and Funding, supra note 7, [22]; Oxford: Comparative Study, supra note 7, III.100. First, contingency fee arrangements are usually available only to plaintiffs, and mainly in tort cases (i.e., not to defendants and not in all forms of litigation). Second, even for tort plaintiffs, a contingency fee arrangement is not viable in low value disputes, as the Oxford Study itself later points out, id. III.113; in fact, this can be true even in high value cases if in light of the necessary investment into litigation, they do not promise sufficient return. Thus the statement in the Oxford Study is true mainly only in the sense that because of the contingency fee system, some parties do not need legal aid.
- 125.
In the United States, there is no generally available public legal aid for private litigation although there are – very limited – federal funds to support legal representation of indigents by lawyers. The federal government and the states do, however, subsidize litigation by providing use of the court system at very low (usually flat) rates (see supra Section 1.3.1.1). As long as parties act pro se (i.e., without a lawyer), they thus often face low financial access barriers to justice, especially in small claims courts and procedures. Where this is not a realistic option, the low court costs cannot make up for the high attorney fees common in the United States. In Russia, public legal aid is available only to a very limited extent in certain classes of civil litigation (as well as, more generally, in criminal cases). Bar associations sometimes provide legal aid as well, see infra Section 1.4.1.2.
- 126.
Article 47 sec. 3 of the Charter of Fundamental Rights of the European Union provides:
-
Legal aid shall be made available to those who lack sufficient resources in so far as such aid is necessary to ensure effective access to justice.
-
- 127.
This is reported for many civil law countries, including Austria, Belgium, Finland, Germany, Greece, Italy, Korea, Mexico, Russia, Serbia, and Venezuela. In some of these countries, private legal aid is available by way of exception on an ad hoc basis.
- 128.
This is reported for Brazil, Canada, the Czech Republic, England and Wales, Iceland, India, Israel, Japan, Macau, the Netherlands, Poland, Scotland, and Turkey, although the degree to which private forms of legal aid exist in these countries apparently varies a great deal.
- 129.
The same conclusion is reached by the Oxford group; see Oxford: Costs and Funding, supra note 7, [24]; Oxford: Comparative Study, supra note 7, III.103.
- 130.
This is confirmed by the Oxford group, see Oxford: Costs and Funding, supra note 7, [24]; Oxford: Comparative Study, supra note 7, III.102. For England, see Andrews, supra note 90, at 187.
- 131.
French Report IV.2.
- 132.
This usually gives the insurer a say in the selection of the attorney, often also in the litigation strategy, and sometimes even in whether and how to settle a case.
- 133.
This kind of insurance is not reported for businesses.
- 134.
In many systems, it covers not only civil litigation but also the costs of defending oneself against civil infraction and criminal charges (in practice most often for traffic violations).
- 135.
Under the respective policies, they usually have to clear that decision with the insurance company which will not provide coverage for bringing frivolous claims.
- 136.
This may be because the actual litigation rate is still relatively low. The French Report, e.g., states that despite great popularity of litigation insurance, only 2.4% of all new cases filed in 2007, and only ca. 2% of all civil litigation expenses, were actually covered by it, see French Report V.4.
- 137.
German Report V.4.; Gerhard Wagner, Litigation Costs Recovery – Tariffs and Hourly Fees in Germany, in Gottwald, supra note 10, at 171 fn. 69 cites 41.6% for 2007/2008.
- 138.
The French Report states that ca. 40% of all households are covered and that this percentage is growing fast, French Report V.4.
- 139.
Here, it is actually encouraged by tax breaks with a view to facilitate access to justice.
- 140.
As the Oxford group points out, litigation cost insurance can lower the holder’s willingness to settle and thus adversely affect settlement rates, Oxford: Costs and Funding, supra note 7, [276]; Oxford: Comparative Study, supra note 7, IV.167.
- 141.
Jackson Review, supra note 9, 79.
- 142.
Peysner, supra note 77, at 137.
- 143.
To counterbalance that risk, the lawyer usually receives a success premium on top of his or her usual fee in case of victory.
- 144.
This is just a rough outline. The details vary greatly because the market offers different models tailored to various kinds of litigation and to the needs of the parties involved.
- 145.
This is normally permitted in England and Wales, but not in Scotland.
- 146.
In this regard, ATE insurance is highly similar to a contingency fee arrangement; the main difference is that the insurance company, rather than the plaintiff’s lawyer, plays the role of litigation financer.
- 147.
See Peysner, supra note 77, 137–138; Oxford: Costs and Funding, supra note 7, [22]; Oxford: Comparative Study, supra note 7, III.115.
- 148.
Jackson Review, supra note 9, XVI, 87.
- 149.
Jackson Review, supra note 9, XVI.
- 150.
The situation in the United States is presented and compared with various European models by Samuel Issacharoff, Aggregating Private Claims, in Gottwald, supra note 10, 63–77. For an overview of the situation in Germany, see Astrid Stadler, Aggregate Litigation – Group/Class Actions in Germany, in Gottwald, supra note 10, 79–93.
- 151.
See especially Federal Rule of Civil Procedure 23.
- 152.
For an overview, see Matthias Casper, André Jansen, Petra Pohlmann and Reiner Schuler, Auf dem Weg zu einer europäischen Sammelklage (Munich 2009).
- 153.
In Finland, for example, they are borne by an ombudsman.
- 154.
As is widely known, in many US-style class actions, successful plaintiffs themselves also rarely gain much. In many cases, their individual claims are very small (so small that they could not be litigated individually); in others, the class action is really about going after a wrong-doer with little or no pay-out to the plaintiffs (as is typical in securities class actions). In some cases, however, individual plaintiffs may receive considerable benefit, e.g., in class actions for mass toxic torts.
- 155.
See also the overview provided by the Oxford group, Oxford: Costs and Funding, supra note 7, [132–133]; Oxford: Comparative Study, supra note 7, Appendix VI.
- 156.
At least with regard to contingency fees in the United States that is not necessarily so, as is well known. Lawyers may actually have an incentive to sell-out their clients’ interests, e.g., if a quick settlement reaps substantial awards whereas obtaining more money for the client beyond that point may involve so much time that is not cost-efficient for the lawyer; see Michael Horowitz, Making Ethics Real, Making Ethics Work: A Proposal for Contingency Fee Reform, 44 Emory Law Journal 173 (1995).
- 157.
They thus remain prohibited in many jurisdictions, especially in Europe. See the long list of (more than a dozen) countries in Oxford: Costs and Funding, supra note 7, [25–26]; Oxford: Comparative Study, supra note 7, III.110.
- 158.
Canada (including, in practice, Quebec, even though Article 1783 of the Civil Code prohibits advocates from “acquiring litigious rights”), China, Finland (for special reasons only), Germany (as of recently and only as a last resort for access to justice), Greece, Iceland, Israel, Italy (as of recently), Japan, Korea, Mexico, Russia (at least in practice), Slovenia, Taiwan, and, of course, the United States. Oxford: Comparative Study, supra note 7, also reports them to be permitted in Estonia, Hungary, Lithuania, Slovakia, and Spain, id., III.110. Note that contingency fees are often capped by legislation (to a certain percentage) or judicially controlled under a reasonableness test.
- 159.
Jackson Review, supra note 9, 131–133.
- 160.
In contrast to contingency fee agreements, no-win-no-fee arrangements are also more common on both the plaintiff and the defendant side.
- 161.
At least in England, their introduction in 1990 and expansion in 1998 was an attempt by the government to compensate for the drastic cuts in public legal aid, i.e., a result of privatizing litigation funding, see Andrews, supra note 90, at 187.
- 162.
In other words, they do not protect against the risk of having to pay one’s lawyer a lot although the gains were small. At least in theory, a client could still owe fees that render the victory pyrrhic.
- 163.
Since lawyers have to be paid for their work by someone, they must of course charge more (if they win half their cases, double) under a no-win-no-fee arrangement than otherwise.
- 164.
The Oxford group reports such caps for Australia, the Czech Republic, and England and Wales, Oxford: Costs and Funding, supra note 7, [25]; Oxford: Comparative Study, supra note 7, III.106.
- 165.
See Wagner, supra note 130, at 172. Some civil law jurisdictions, however, apparently, forbid it, e.g., Korea, Norway, Serbia, Taiwan, and Turkey.
- 166.
This is indicated in the National Reports for Austria, Italy, Macau, Slovenia, Sweden, Switzerland, and Venezuela. The Reports for China and Switzerland also point out that the sale of just the right to sue is not allowed.
- 167.
See, for the development and current situation in the United States, the detailed analysis by Tony Sebok, The Unauthentic Claim, 64 Vanderbilt Law Review 61 (2011).
- 168.
Apparently not in Scotland, however.
- 169.
In recent years, the literature on third-party litigation funding has become a deluge; see, e.g., Michael Abramowitz, On the Alienability of Legal Claims, 114 Yale Law Journal 697 (2004); Isaac M. Marcushammer, Selling Your Torts, 33 Hofstra Law Review 1543 (2009); Marco de Marpurgo, A Comparative Legal and Economic Approach to Third-Party Litigation Funding, 19 Cardozo Journal of International and Comparative Law 343 (2011); Jonathan T. Molot, A Market in Litigation Risk, 76 University of Chicago Law Review 367 (2009); M.J. Shukaitis, A Market in Personal Injury Tort Claims, 16 Journal of Legal Studies 329 (1987); US Chamber Institute for Legal Reform, Selling Lawsuits, Buying Trouble: Third Party Litigation Funding in the United States (2009).
- 170.
This is confirmed by the Oxford group, Oxford: Costs and Funding, supra note 7; Oxford: Comparative Study, supra note 7, III.116. For an overview, see de Marpurgo, supra note 162 (ch. III.B.).
- 171.
The National Reports from the civil law jurisdictions either indicate that such funding is allowed or contain no response to this particular question; in France, the question is apparently being debated and no final conclusion has been reached; for an overview, see also de Marpurgo, supra note 162 (ch. V.B.). As Gerhard Wagner, supra note 130, at 172, remarked: “It is one of the enigmas of comparative civil procedure that the civil law with its hostility towards contingency fees, has no qualms with the assignment of claims and the funding of litigation through a third party whereas the common law allows contingency fees or at least success fees which involve the personal economic interest of the lawyer in the outcome of the litigation while it bans the promotion of litigation by third parties. It seems that the funding of litigation through outside investors is much more harmless, in terms of public policy, than to allow a lawyer to act, at the same time, as counsel and as entrepeneur operating with a portfolio of claims.”
- 172.
Many (but not all) common law jurisdictions have made an exception for contingency fee agreements between parties and their lawyers.
- 173.
Giles v. Thompson [1994] a AC 142 (England); Campbells Cash and Carry Pty. Ltd. v. Fostif Pty. Ltd., [2006] HCA 41; (2006) ALR 58 (2006) (Australia). For a detailed argument that the traditional common law restrictions have become dysfunctional and should thus be lifted, see Sebok, supra note 160.
- 174.
For an overview of the – highly fragmented – situation in the United States, see Sebok, supra note 160.
- 175.
Some of these questions are outlined in Oxford: Costs and Funding, supra note 7, [98–99]; Oxford: Comparative Study, supra note 7, III.118.–121.
- 176.
The Jackson Review, supra note 9, takes a favorable view, see id., 117–124.
- 177.
See Hein Kötz, Abschied von der Rechtskreislehre? Zeitschrift für europäisches Privatrecht 3 (1998) 493.
- 178.
Konrad Zweigert and Hein Kötz, An Introduction to Comparative Law (Tony Weir transl., 3rd ed., Oxford, New York 1998) 132.
- 179.
Id., 74.
- 180.
For example, in Mexico, there is no cost and fee shifting in commercial cases at all, and in Venezuela, cost shifting requires a perfect victory.
- 181.
A preliminary look at data available in Platto, supra note 6, and various national reports solicited by the authors of the Oxford Study, supra note 7, suggest that at least the first and third groupings envisaged here make sense. With regard to a Central and Eastern continental European group, Bulgaria, Denmark, Estonia, Hungary, Latvia and Romania all embrace the loser-pays principle and shift both court costs and attorney fees; yet, it appears that in some of these jurisdictions, especially in Denmark and Hungary, judicial discretion does play a fairly significant role. In a similar vein, the information available about further (former) British commonwealth members Hong Kong, New Zealand, Singapore, and also Ireland is compatible with such a grouping; again, however, the role of judicial discretion is apparently weaker in some of these jurisdictions (such as Hong Kong) than in others (such as Ireland). With regard to the second group, one could also conclude that the denial of attorney fee shifting in the Philippines and Indonesia reported by Jäger, supra note 14, at 1 (fn. 1) put these countries in line with the most of the other East Asian jurisdictions covered in this essay, i.e., Japan, Taiwan, and China.
- 182.
For a search for an alternative approach, see Ugo Mattei, Three Patterns of Law: Taxonomy and Change in the World’s Legal Systems, American Journal of Comparative Law 45 (1997) 5.
- 183.
Even though the major reform of the English civil justice system in 1998 has shifted much control over the course of litigation from the parties (and their counsel) to the court, the impact of the reform on the ground has apparently been fairly limited; in particular, it has done little to bring the costs of litigation under control, see Adrian Zuckerman, Court Case Management in England and the Civil Procedure Rules 1998, in Gottwald, supra note 10, 1–13; Peysner, supra note 77, 146–147.
- 184.
In other words, it does not matter for present purposes what other, traditional criteria suggest, such as the influence of Roman (private) law, the role of codification (and statutes) versus case law, or the emphasis on a more theoretical versus a more practice-oriented legal education.
- 185.
It is true, however, that given the large role of judicial discretion in the commonwealth tradition, its members’ commitment to it is sometimes dubious, as in the cases of Israel and India, see supra Section 1.2.1.2.
- 186.
Supra Section 1.3.2.2.
- 187.
Ilmer, supra note 96, at 307, confirms this with regard to England, though without further references.
- 188.
Hourly rates range widely across both civil and common law jurisdictions, see Oxford: Comparative Study, supra note 7, Appendix III.
- 189.
As the National Reporter for the United States pointed out in his comments on the Draft General Report, there is – at least arguably – an additional reason, i.e., the different degrees of legal certainty in civil and common law systems: where the law is less certain, it takes more work to decide cases. The hypothesis of significantly differing legal certainty between civil and common law, however, is difficult to generalize and even more difficult to verify. It is true though that in the United States, the high degree of private law fragmentation in the federal system (where most private law is left under the legislative and judicial jurisdiction of the states) diminishes the degree of legal certainty and often increases the legal complexity of disputes.
- 190.
See supra Section 1.3.3.2; Langbein, supra note 75. To be sure, the extent of permissible discovery varies hugely among common law systems with the United States presenting an extreme case. Yet, even under more restrictive approaches, as in the England and Wales, fact-gathering is usually more labor-intensive than in civil law jurisdictions.
- 191.
In his comment on the Draft General Report, the National Reporter for the United States proffered an additional argument: in common law countries, the bar tends to have greater control over the litigation system than in civil law countries where the state is more directly involved; the bar thus serves its own interests with less restraint in the former than in the latter.
- 192.
Supra note 142 and text; see also Jackson Review, supra note 9, 36–39 (“proportionate costs”); Zuckerman, supra note 183, at 14; Andrews, supra note 90, 188–189; Peysner, supra note 77, 145–146.
- 193.
There are exceptions. In England and Wales, for example, certain cases are handled under a fixed fee, see supra 103; US-style contingency arrangements also make the fee quite predictable, albeit only in terms of a percentage of the amount eventually won (if any).
- 194.
Court fees do not present a predictability issue because virtually everywhere, they are determined by law in precise amounts tied to the amount at controversy and/or the stage reached by the case.
- 195.
The greater predictability of lawyer fees in the civil law world is also indicated by the willingness of the various National Reporters to predict the litigation bill in certain kinds of cases. While a clear majority of Reporters from civil law jurisdictions provided numbers, a clear majority of Reporters from common law systems refused to do so because the uncertainty was just too great. Of course, one must not overrate these reactions because much depends on the individual Reporters’ willingness to venture a guess (several Reporters from civil law jurisdictions also refused to provide a good faith estimate because too much depends on the circumstances of the case). Still, it is noteworthy that Reporters even from civil law jurisdictions without official fee schedules apparently felt by and large more comfortable to provide good faith estimates than their common law colleagues. If attorney fees are by and large considered more predictable in the civil law systems, this may well reflect that they actually are.
- 196.
See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471–472 (1985); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
- 197.
See Oelrichs v. Spain, 82 U.S. 211, 231 (1872).
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Reimann, M. (2012). Cost and Fee Allocation in Civil Procedure: A Synthesis. In: Reimann, M. (eds) Cost and Fee Allocation in Civil Procedure. Ius Gentium: Comparative Perspectives on Law and Justice, vol 11. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-2263-7_1
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