The calculation of fees in accordance with the German Act on the Remuneration of Lawyers (RVG)
In principle, the remuneration of lawyers in Germany is governed by the Act on the Remuneration of Lawyers – Rechtsanwaltsvergütungsgesetz (RVG). According to this law, the fee for legal services is mainly calculated according to the value of the subject matter of the legal services. Some of the fees under the Act on the Remuneration of Lawyers are so-called framework fees. This means that the law provides for a minimum and a maximum fee. Within this framework, the lawyer can set the fee based on various factors such as the difficulty or scope of the matter. The RVG contains a fee table that can be used to calculate the lawyer’s fees.
The fee for a first consultation
For so-called first consultations, the maximum fee is 190 euros for an oral consultation and 250 euros for a written consultation if the client is a consumer. In this context, it should be noted that a so-called first consultation can generally only be a summary examination and initial assessment. It is often necessary for the lawyer to examine the matter in more detail. In this case, however, it is no longer considered a first consultation. It is then a consultation for which the lawyer and client should contractually agree on a fee.
The remuneration agreement
According to the German Act on the Remuneration of Lawyers, the lawyer and client have the option of concluding a remuneration agreement. Such a remuneration agreement makes sense if the statutory fees are not in proportion to the work involved or the value of the matter.
Remuneration for extrajudicial and judicial activities
Out of court, a lawyer may also agree a lower fee than the statutory fee. In court proceedings, the statutory fees of the RVG represent minimum fees, which may not be undercut by a remuneration agreement. In the case of a remuneration agreement, the client and lawyer are free to choose the type of remuneration. In some cases, flat rates can be agreed, in others hourly rates. With foreign companies, it is also possible to agree on the applicability of foreign remuneration law.
Agreeing an hourly fee rate
The hourly rate of a lawyer in Germany usually varies between 180 and 500 euros net. However, there are also lawyers who, for example, agree on an hourly rate of 100 euros or even 1,000 euros net. According to the case law of the German Federal Court of Justice, an hourly rate of 290 euros net is quite reasonable for a lawyer. In individual cases, the appropriate hourly rate may deviate from this. It can also be higher depending on specialization, for example. Specialized lawyers often charge higher hourly rates – in return, they are very familiar with the subject matter and do not have to research the legal situation for long. According to a study by the University of Hanover, a lawyer normally has to charge € 230.00 per hour for each client in order to have a reasonable income after deduction of all costs. Due to inflation, fees tend to rise.
Legal expenses insurance
Legal expenses insurance is important
Legal expenses insurance plays an important role when it comes to financing legal disputes. Legal costs can quickly add up to several 1,000 euros. This can quickly lead to financial difficulties if legal expenses insurance does not provide cover. Legal expenses insurance not only covers the costs of legal proceedings. If you are unsuccessful, it also pays the costs of the successful opposing party. It often happens that a lawyer advises against taking legal action in cases where there is no legal expenses insurance due to the high cost risk.
Request for cover and correspondence with the legal expenses insurance company
A client who has legal expenses insurance must first submit a request for cover to their legal expenses insurer in order to determine whether the costs of legal action will be covered by the insurer. Clients holding legal expenses insurance can request cover themselves. However, lawyers often take over the correspondence with the legal expenses insurance for their clients. This activity is generally subject to a fee, even though there are some lawyers who do not charge their clients for this activity. Sometimes there are cases in which the correspondence with the legal expenses insurance company is more extensive than the correspondence with the other party. The lawyer explains the prospects of success to the insurance company, as the insurer could refuse cover if there are no prospects of success. In such cases, the client should expect to have to pay for this work. In this context, it is important for policyholders to know that even if they have legal expenses insurance, they are and remain the lawyer’s client. This means that they always owe the lawyer remuneration.
Cover provided by legal expenses insurance
Many legal expenses insurance companies offer a so-called modular system allowing each policyholder to decide which areas of their life they want to cover. There are also caps on the sums insured, although these are not usually reached. Many clients agree a deductible with their insurance company. This is recommended to reduce the premium costs. The amount of the deductible can in fact be as high as 500 euros.
Typical areas covered by legal expenses insurance are
- disputes in labor law
- neighborhood disputes
- tenancy disputes
- enforcement of compensation claims
- proceedings before the tax courts
- road accidents
- disputes with statutory health, accident, pension or unemployment insurance
Legal expenses insurance provides cover for
- costs for the lawyer, provided they do not exceed the statutory costs
- court costs
- fees for court-appointed experts and witnesses
- costs for a mediation process
- costs of the opposing party amounting to the statutory amount in the event that a legal dispute is lost
Special legal protection for self-employed persons and executives
Legal expenses insurance companies also offer legal protection for businesses. If it is necessary for a policyholder to hire a lawyer when exercising their commercial or freelance activity, the resulting costs can be covered. Criminal law cover is also important in this context, as not only the statutory fees are covered. This is important because defense attorneys in criminal tax matters usually agree on hourly rates with their clients.
No cover for certain areas of law
There is a precise calculation behind every insurance policy. No insurance company will offer a product that is in deficit overall. This means that certain areas of law are generally not covered. These include in particular
- disputes regarding house construction
- copyright and trademark law
- investments
In inheritance and family law, cost coverage is generally limited to a first consultation.
The cover note
Legal expenses insurance issues a so-called cover note if an agreed insured event has occurred and the legal action has sufficient prospect of success. Whether an insured event is given depends on the insurance policy. With regard to lawyers’ fees, legal expenses insurance covers the statutory fees. This means that the policyholder often has to pay a large part of the lawyer’s fees themselves in the case of an hourly fee.
Problems with the reimbursement of costs by the legal expenses insurance
Even if cover is granted, there are frequently disputes with legal expenses insurers when it comes to the settlement of costs. Legal expenses insurers often reduce invoice items. This leads to the client having to pay part of the costs to the lawyer despite the legal expenses insurance’s confirmation of cover. This is the case, for example, when the lawyer invoices travel expenses. Legal expenses insurers often refuse to cover these costs as they can be avoided by hiring a lawyer locally. With a few exceptions, this legal opinion is not tenable. In Germany, the free choice of lawyer applies. In any case, it is irrelevant to the lawyer what the insurance company pays. The mandate is always issued directly by the policyholder. The legal expenses insurance only reimburses the costs. The direct payment to the lawyer only serves to shorten the payment process. If the insurance company does not cover part of the costs, the lawyer will invoice these costs to the client, who must indeed pay them.
The lawyer of trust of the legal expenses insurance
Legal expenses insurers have so-called framework agreements with some lawyers. These lawyers are then called “trusted lawyers” of the XY insurance company. However, the term “trusted lawyer” in this case does not necessarily mean that the lawyer is distinguished by special expertise, for example, and is therefore preferable to other lawyers. Rather, insurers agree special conditions with lawyers, which in many cases are below the appropriate fees. In return, the lawyer of trust receives a particularly large number of recommendations and cases, so that it is worthwhile for certain lawyers to be lawyers of trust. Our tip in this context: If you are looking for a specialist, you should consult a specialist lawyer instead of a trusted lawyer. In any case, clients may decide for themselves which type of support they prefer.
Legal aid
If a client is indigent, it is possible to apply for legal aid. Being indigent means that the client is not financially able to bear the costs of a lawyer to pursue their rights. In this case, the legal action must have sufficient prospect of success. The state does not pay for arbitrary litigation. The state has the option of reclaiming the costs advanced for a lawsuit from the party if the party’s financial situation improves within three years of the end of the legal dispute. When legal aid is granted, it is also important to remember that you will have to pay the other party’s costs if you lose the case, despite being granted legal aid. Receiving legal aid therefore does not mean litigating for free and at the state’s expense. Rather, the state pre-finances the costs, with the lawyer only receiving a reduced fee if the value of the case exceeds a certain amount.
Appointment of a defence counsel in criminal cases
In criminal proceedings, there are cases in which the public prosecutor’s office or the court appoints a defence counsel for a defendant. The accused is not required to be indigent. In fact, according to Section 140 of the German Code of Criminal Procedure StPO a public defender must be appointed for a defendant if there is a so-called case of mandatory defense. The costs of a defence counsel are part of the procedural costs and must be paid to the state by the convicted person at a later date. This means that even if a defence counsel is appointed, the state only advances the costs. The fee rates of a defence counsel are reduced in comparison to the normal fee rates according to the Act on the Remuneration of Lawyers. Defendants who have a defence counsel can pay the lawyer an additional fee. Payments made by the client are not to be offset, provided the fee does not exceed the defence counsel’s fee. In addition, it is common in criminal cases, especially if the case is particularly extensive, for the defense lawyer and the accused to conclude a remuneration agreement.
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