Antonio Flores’ Blog

Recent enactment of legislative reforms that requires claimants to pay court filing fees when “making use of the public service of the administration of justice” has forced lawyers, already under severe stress due to the still struggling economy, to downsize their fee aspirations. In fact, even to the point of having to waive the retainer to allow a case -or an appeal- to go forward, on a no-win no-pay basis.

But what happens when one loses a case? And if no agreement was struck with the lawyer?

The following notes should help understand the legal fees’ system:

a)      The Spanish Solicitors’ Code of Practice establishes an absolute freedom to fix legal fees, pursuant to a Supreme Court ruling that nullified the prohibition of conditional fees.

b)      Where no agreement is struck clients needs to be aware that by default, they will fall under the legal fee guidelines approved by the provincial Bar Association, and these can be pretty heft (a case worth €300k will attract €25k in fees, only in the first instance).

c)       Equally, where a case is lost and the Court awards costs i.e. pay the other party’s legal fees, they will too be calculated by reference to the respective Bar Association, in any case.

d)      If scenarios b) and c) happen to coincide, an unsuspecting claimant could find that a case relating to a property worth say €300k could actually cost him €50k!

e)      On property conveyancing, 1% of the purchase price is still pretty standard, in spite of the crisis; the reason for this is perhaps to do with the hefty quantum of a potential claim i.e. up to the value of the property and, notably, the very the lengthy mandatory 15-year liability term to validly bringing a claim against a conveyancing lawyer.

The above conclusions make it very advisable prior to filing a case, and even responding to a claim filed against one, to request from the acting lawyer for an appraisal of the likely legal costs should the case be lost as, very often, these are ignored ab initio. And naturally, have one’s own fees agreed and ratified by signing a letter of engagement or letter of instruction.

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It was not until 2008, when the Spanish Supreme Court got its hands on this controversial matter that Spanish lawyers were at liberty to agree on pure conditional fee arrangements, better known as no-win no-fee, or “pactum de quota litis“. Because up until then, it was actually forbidden for lawyers in Spain to work freely in pursuit of a favourable result for their client, upon which they would share the proceeds of the recovery.

This prohibition was removed by the Tribunal for the Defense of Free Competition, who established that any rule preventing a client and a lawyer from freely fixing their fees was a restraint to free competition, declaring any regulation to the contrary null and void, at which point they also fined the Spanish Law Society with €180,000. On appeal, the National Audience revoked this decision but, on further appeal to the Supreme Court, the original ruling was upheld (though the fine removed).

Detractors of this arrangement consider that these types of agreements do not guarantee civil justice and that legal professionals “cherry pick” only the strongest claims, which are most likely to succeed. In sum, that they make lawyers party to the claim (conflict of interest), diverting them their ‘statutory’ functions i.e. serenity of judgment, independence and dignity, collaboration with justice and moral integrity, all of them alien to the concept of “ambulance chaser”, a term that came in handy to shame campaigners of the conditional fee agreement.

Supporters claim that this system allows people with few financial means access to the court which otherwise, could not afford. In this context, no win no fee also provides significant motivation to the lawyer to work diligently on the client’s case whereas, if the fees are fixed, it would makes little economic difference for that lawyer whether the client has a successful outcome to the litigation. Finally, it is also argued that the number of speculative, frivolous or unmeritorious cases may be reduced.

Arguments for and against are equally respectable but, in today’s socio-economic world, it would seem daft to uphold restraints to private agreements between clients and their lawyers, in the context of free competition, even in spite of the semi-prohibition of the Charter of Core Principles of the European Legal-Profession.

Antonio Flores Legal Practise Ambulance Chasers Spain, No-Win No Fee Spain, spanish lawyers, Tribunal for the Defense of Free Competition