Attorney’s fees and what the law says
According to Art. 26 of the Law of Ukraine “On Advocacy and Advocacy”, advocacy is carried out on the basis of an agreement on the provision of legal assistance. A contract for the provision of legal assistance is an agreement under which one party (lawyer, law office, bar association) undertakes to provide protection, representation or provide other types of legal assistance to the other party (the client) on the terms and in the manner specified by the contract , and the client undertakes to pay for the provision of legal assistance and the actual expenses necessary for the performance of the contract (Article 1 of the Law of Ukraine “On Advocacy”).
The fee is a form of remuneration of the lawyer for providing protection, representation and other types of legal assistance to the client.- The procedure for calculating the fee (fixed amount, hourly payment), the grounds for changing the amount of the fee, the procedure for its payment, terms of return, etc. are defined in the contract on the provision of legal assistance.
And when determining the size of the fee, a number of factors are taken into account:
- amount of time and work required for the proper execution of the assignment;
- degree of complexity and novelty of legal issues related to the mandate;
- need for experience for its successful completion;
- probability that the acceptance of the mandate will prevent the lawyer from accepting other mandates or significantly complicate their execution in the usual time regime;
- need to go on a business trip;
- achieving a positive result desired by the client based on the results of the execution of the assignment;
- special or additional requirements of the client regarding the terms of execution of the order;
- nature and duration of the professional relationship of this lawyer with the client;
- importance of the order for the client;
- role of the lawyer in achieving the hypothetical result desired by the client
In addition, the amount of the attorney’s fee certainly depends on the stage at which you applied to resolve your situation. For example, the attorney’s fee in the court of first instance will be lower than at the stage of appeal of the court’s decision.
Deduction of the attorney’s fee in court
The amount of expenses for the attorney’s services must be commensurate with:
1) the complexity of the case and the work performed by the lawyer (services provided);
2) the time spent by the lawyer on performing the relevant work (providing services);
3) the amount of services and works performed by the lawyer;
4) the cost of the lawsuit and (or) the importance of the case for the party, including the impact of the resolution of the case on the party’s reputation or public interest in the case.
When determining the amount of compensation, the court must proceed from the criterion of the reality of attorney’s fees (establishing their validity and necessity), as well as the criterion of reasonableness of their size, based on the specific circumstances of the case and the financial status of both parties.
Legal assistance includes consultations and clarifications on legal issues; drawing up statements, complaints and other legal documents; representation in courts, etc. According to legal norms, the court itself determines, within the limits established by law, the procedure for carrying out proceedings in the case in accordance with the principle of proportionality, taking into account: tasks of economic justice; ensuring a reasonable balance between private and public interests; features of the subject of the dispute; the price of the claim; the complexity of the case; the importance of the case for the parties, the time required to perform certain actions, the amount of court costs associated with the relevant procedural actions, etc.
To determine the amount of expenses for professional legal assistance for the purpose of distribution of legal expenses, the party to the case submits a detailed description of the work (services) performed by the lawyer and the expenses incurred by him, necessary for the provision of legal assistance.
Real court cases and attorney loss clarification
“According to Part 5 of Article 129 of the Economic Procedural Code of Ukraine, when deciding on the distribution of court costs, the court takes into account: 1) whether these costs are related to the consideration of the case; 2) whether the amount of such expenses is justified and proportionate to the subject of the dispute, taking into account the price of the claim, the importance of the case for the parties, including whether the result of its resolution could affect the reputation of the party or whether the case caused public interest; 3) the behavior of the party during the consideration of the case, which led to the delay of the consideration of the case, in particular, the submission by the party of clearly unsubstantiated statements and motions, groundless assertion or denial by the party of certain circumstances that are important for the case, groundless overstating of claims by the plaintiff, etc.; 4) the actions of the party regarding the pre-trial settlement of the dispute and the peaceful settlement of the dispute during the proceedings, the stage of the proceedings at which such actions were taken.
Thus, when determining the amount of compensation, the court must proceed from the criterion of the reality of attorney’s fees (establishing their validity and necessity), as well as the criterion of reasonableness of their size, based on the specific circumstances of the case and the financial condition of both parties. The European Court of Human Rights applies the same criteria when awarding court costs on the basis of Article 41 of the Convention. In particular, according to its practice, the applicant has the right to compensation for legal and other costs only if it is proven that such costs were actual and unavoidable, and their amount was justified (for example, the decision in the case “East/West Alliance Limited” v. Ukraine” , application N19336/04, item 269).
The decision of the European Court of Human Rights in the Lavents v. Latvia case states that only costs that are reasonable are reimbursed.
In determining the reasonably necessary sums to be paid for the lawyer’s services, the following may be taken into account, in particular, but not exclusively: norms of expenses for business trips established by regulatory legal acts (if they are established); cost of economical transport services; the time that could be spent on the preparation of materials by a qualified specialist; the cost of paying for the relevant services of lawyers, which has developed in the country or in the region; available information from statistical bodies or other bodies about prices on the legal services market; duration of consideration and complexity of the case, etc. This legal position is set out in the Supreme Court’s decision dated September 17, 2019 in case No. 910/4515/18.
Taking into account the above, it can be seen from the documents provided by the applicant that the amount of the claimed expenses is reasonable and justified (as a mandatory condition for reimbursement of such expenses by the other party).
Taking into account the circumstances of this case, its complexity, the subject matter and grounds of the claim, the extent of the legal protection provided by the lawyer to the plaintiff, the court came to the conclusion that the amount of costs for the lawyer’s services determined by the plaintiff is commensurate with the work performed by the lawyer in representing the interests of the plaintiff in this case, and therefore deems for possible expenses in the declared amount to be placed on the defendant”.
Attorney success fee
The legislation does not contain a definition of the concept of “success fee”, and this gap has long been an exceptional legal problem for the formation of a uniform judicial practice regarding the reimbursement of legal costs, in particular the costs of professional legal assistance. In theory, the “success fee” is a contractual form of payment for legal services (lawyer’s work), which is carried out only in the event that the lawyer obtains a certain legal result stipulated in the contract on the provision of legal assistance with the client.
In Ukraine, many judges consider the agreement concluded between the lawyer and the client on the provision of legal assistance in accordance with Art. 903 of the Civil Code of Ukraine as a contract for the provision of services, and the attorney’s fee itself according to Art. 632 of the Civil Code of Ukraine is considered the price of such a contract. In their opinion, the additional remuneration of the lawyer for achieving a certain result, although provided for in the contract on the provision of legal assistance, is not a legal service by its legal nature and does not belong to court costs, in particular the costs of professional legal assistance according to Art. Art. 123, 126 of the Civil Procedure Code of Ukraine. That is, in other words, the mandatory result is not professional legal assistance, therefore it is not compensated.
Case law on the determination of the attorney’s success fee
The court of cassation considered the agreement on the provision of legal assistance and the additional agreement to it, according to the terms of which the lawyer’s fee consisted of two parts. Thus, clause 4.1 provided that the client, regardless of whether the goal of the representation was achieved, pays the lawyer for the representation: in the commercial court of the first instance – UAH 5,000; in the commercial court of the appellate instance – UAH 1,000; in the commercial court of the cassation instance – UAH 1,000. And clause 4.2 provided that if the goal of the representation is achieved (a court decision on recovery is adopted), the client will additionally pay the lawyer a fee of UAH 5,000.
The Supreme Court emphasized that the success fee is a component of the attorney’s fee stipulated in the contract on the provision of legal aid, and is a valid obligation that corresponds to Article 30 of the Law of Ukraine “On Advocacy and Advocacy”. The amount of the attorney’s general fee stipulated in the contract on the provision of legal aid does not exceed the limits of reasonableness. The procedure for calculating the fee (fixed amount, hourly payment), the grounds for changing the amount of the fee, the procedure for its payment, terms of return, etc. are defined in the contract on the provision of legal assistance.
The analysis of special legislation regarding the activity of a lawyer gives the right to conclude that the legislation of Ukraine does not establish the relevant requirements for the settlement document that the lawyer must provide when the client pays for services, and the form of such a document is also not established.
Taking into account the above and the fact that it is not the lawyer’s responsibility to open his own account, the lawyer can issue the client at his request a document (receipt, certificate, etc.) drawn up in an arbitrary form that will confirm the fact of receiving funds from the client.
The Supreme Court agrees with the conclusion of the courts that the provisions of subparagraph “d” of clause 4.4. the remuneration of the contract concluded between the parties in the case is an additional remuneration of the lawyer, payment for the result achieved by the lawyer, and is in its essence a so-called “success fee”, the calculation and payment of which depends on the occurrence of a certain event.
Although the current legislation does not contain a definition of such a type of fee as a success fee, the Supreme Court takes into account the fact that the Grand Chamber of the Supreme Court in the Resolution of May 12, 2020 in case No. 904/4507/18 actually came to the conclusion about the possibility of the existence of a “success fee ” as a form of payment of the lawyer’s fee, recognized the legality of the definition between the lawyer and the client in the contract on the provision of legal assistance of such a type of fee as a “success fee”, which corresponds to the principle of freedom of contract and the numerous practice of the European Court of Human Rights.
The Supreme Court notes that agreed by the parties in clause 4.4. of the agreement on the provision of legal assistance, the amount of the fee in general (both the main one, provided for in subparagraphs “a”, “b”, “c” of clause 4.4. of the agreement, and the additional one, provided for in subparagraph “d” of clause 4.4. of the agreement), is inherently agreed upon by the parties at the price of the contract within the meaning of Articles 632, 903 of the Civil Code of Ukraine, Article 189 of the Economic Code of Ukraine, since in accordance with the requirements of the current legislation, the fee, regardless of its type (main, additional (success fee)) is a form of remuneration of the lawyer for the protection, representation and provision other types of legal assistance to the client, that is, it is a fee for the work performed / services provided.
At the same time, the Supreme Court notes that the determination by the parties in the agreement on the provision of legal assistance of the procedure for calculating the fee as a percentage of a certain amount of money (in this case – from the amount by which the court in the case will reduce the amount of debt declared before collection from the defendant , that is, from the amount of the lawyer’s result of the services provided in the case with property claims) corresponds to such a form of fee calculation as a fixed amount. With this procedure for calculating the fee, the actual amount of time spent by the lawyer on providing services to the client is irrelevant, and as a result, a clear fixed amount of money is determined.
The fact that the calculation of the success fee is connected with the occurrence of a certain event, which was noted by the courts of previous instances, is justified and logical due to the very essence of the success fee, the possibility of calculating which depends exclusively on certain events – the results achieved by the lawyer and stipulated in the contract provision of legal aid services.
In view of the above, the Supreme Court considers erroneous the conclusion of the courts of previous instances that the “success fee” defined in the contract is not a fixed amount and does not meet the requirements of the current legislation, based on the form of its calculation.
Therefore, value your lawyers, take into account many factors regarding the policy of forming a fee for legal services provided, do not forget about the incentive of a “success fee” and then cooperation will be at the highest level.
advocacy / attorney / copyright / fee payment / intellectual property / success fee
