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Lawyer's remuneration and ways of determining it

This right is enshrined in Section 22 of the Law on Advocacy, which provides that advocacy is usually performed for remuneration. The content of that provision corresponds to the fact that the activity of a lawyer is, in spite of its "higher mission", an entrepreneurial activity, and the lawyer therefore performs it for profit. By establishing a legal relationship between a lawyer and a client, therefore, the client's duty to provide remuneration to the lawyer is also created. Remuneration can be determined in different ways. The most important thing, however, is to distinguish between contractual and non-contractual remuneration. Contractual remuneration is set directly in the contract for the provision of legal services negotiated between a lawyer and a client. If this is not the case, the remuneration is non-contractual and its amount is determined in accordance with the relevant legislation, which will be described below. The lawyer also has the right to request from the client a reasonable deposit, the amount of which is determined, in particular, in terms of the total price and expected cash outflows. However, such an advance payment must be charged at the client's request upon termination of their relationship.

We can therefore recognize the following types  of remuneration:

I. Contractual remuneration

In practice, it is more frequent than a non-contractual remuneration. Emphasis is placed on the contractual freedom of the parties, but for the protection of the client, the lawyer has certain obligations to set contractual fees. In particular, it will be the duty of the lawyer to provide the client with true information about the expected extent of his actions and, if the client asks so explicitly, to explain him the amount of non-contractual pay in the matter for their mutual comparison. Furthermore, great emphasis is placed on the proportionality of contractual remunerations. When assessing the appropriateness of the remuneration, account must be taken in particular of the lawyer's knowledge, experience, reputation and abilities, the client's time requirements for the settlement of the case, the difficulty and the novelty of the factual and legal problems, the nature and duration of the relationship between the attorney and the client and other relevant facts.

It should also be noted that if a lawyer does not provide the legal services in full and unless the law on the contract on legal services provides otherwise, the attorney is entitled to only a proportion of the remuneration agreed.

In the contract between a lawyer and a client it is possible to negotiate different types and forms of contractual remunerations:

(a) Fixed remuneration

The fixed remuneration, sometimes also the lump sum, is fixed at a precise amount, which need not be negotiated only for a particular legal matter, but also for all legal matters in which the lawyer will provide the client with legal services. In view of the difficulty in estimating the time and content requirements of individual cases, this remuneration is in practice less frequent.

(b) Time remuneration

This remuneration is determined by the amount for a certain time unit, usually an hour. On the basis of the work done, by multiplying the number of time units and the hourly rate the lawyer's final remuneration is determined. In contact with a lawyer, the client is most often encountered in practice with an hourly rate, which is also the basic distinguishing element of individual law firms. According to advocacy provisions, a lawyer is entitled to remuneration for each started time unit, hour, which is of course possible to modify in the interest of the client in the contract. In the contract, a time remuneration with a certain ceiling can be negotiated, above which the lawyer is no longer entitled to additional remuneration. Time remuneration has the advantage that it accurately reflects the specifics of a particular case and, on the contrary, the disadvantage of the difficult demonstration of the exact length of time spent.

(c) Contingent fee (share remuneration)

The amount of this remuneration is derived from a certain asset value related to a given legal case, that is, the value of the thing that is the subject of the provision of legal services or the outcome of the case. Czech lawyers regard this kind of remuneration rather cautiously and accept it only on the assumption that it is really reasonable and that in the case of a contingent remuneration for the result, the reasons for it are considered to be worthwhile, especially social or property reasons. This solution is more or less a compromise in international comparisons, as the "pactum de quota litis", or a contingent remuneration from the outcome of the case, is even forbidden in many countries to be unethical, but in some (especially the US) it is quite widely used.

The European Union's legislation on share remuneration is rather negative when the Code of Conduct for European Community Lawyers in Article 3.3. provides:

"The lawyer cannot make a payment under an agreement, pactum de quota litis." Pactum de quota litis means an agreement between a lawyer and his client concluded before the final termination of the case in which the client is a participant, under which the client undertakes to pay the lawyer a share regardless of whether it is a cash consideration or other benefit received by the client as a result of the termination of the matter. The Pactum de quota litis does not include an agreement whereby the fee is accounted for as a proportion of the value of the matter in which the attorney represented, if this is in line with the officially declared tariff or with the regulations of the competent authority whose powers the lawyer is subject to."

The reason for the ban is, according to the Explanatory Report to the Code, that the determination of remuneration by the share of the outcome promotes the conduct of speculative cases, runs counter to proper justice and is easily misused. However, it must be added that objectively, this method of negotiating a lawyer's remuneration has its advantages and disadvantages. Benefits include, in particular, improved access to justice for the poor, increased involvement of the lawyer and greater efficiency of legal services, risk pooling, deferral of client spending over time and preference for amicable settlement. On the other hand, the disadvantage can be the promotion of speculative cases, the conflict of interests between the attorney and the client, and, last but not least, the disproportionate amount of remunerations.

II. Non-contractual remuneration

Non-contractual remuneration comes into consideration in law practice in the following cases:

a) Remuneration  according to the lawyer's tariff

This remuneration and method of its determination is regulated by the Decree of the Ministry of Justice No. 177/1996 Coll., On the remuneration of attorneys and attorneys' fees for the provision of legal services, as amended (hereinafter referred to as the "lawyer's tariff"). This Decree was significantly amended with effect from September 1, 2007 and among other things, the long-awaited increase in the tariff rates, the adjustment of the overdraft and the change of billing for multipurpose overlap were newly grounded.

The amount of non-contractual remuneration is determined by the lawyer's tariff. Its calculation is based on the fact that the types of important advocacy - acts of the legal service are determined, and it is necessary to include the legal case within the lawyer's tariff (unless the act is directly listed, it must be subordinated to the act by its nature and purpose nearest) and to find out its so-called tariff value, a kind of financial valuation. From this tariff value, the so-called rate of non-contractual remuneration, or the amount that the attorney is entitled to obtain for one legal service (such as taking over and preparing a representation, filing to a court, participating in court proceedings, dealing with a counterparty, precautionary measures, etc.). The general rule is that if the special rate is not listed  in the lawyer's tariff, then the tariff value corresponds to the amount of cash consideration, the price of the thing or the right. We can find a special arrangement, for example, in the case of the settlement of the joint property of the spouses, the determination of the law, etc. The tariff value thus determined can then easily be converted, according to the table, to the non-contractual remuneration rate, that is the amount of the lawyer's remuneration for an individual legal act. In some cases (less important legal acts), the attorney is entitled to only half of the specified rate - typically a proposal to rectify a statement of reasons, to appeal against a decision, unless it is a decision on the merits, etc.; in some cases, this lawyer's non-contractual remuneration may be increased.

Non-contractual remuneration determined according to the lawyer's tariff appears at first sight to be fixed, but it can, however, be increased or decreased for certain reasons. The reason for the increase, up to three times, is mainly the use of foreign law or foreign language, the time-consuming acts of the legal service where the attorney is forced to deal with his client and his case on holidays or in the late evening. On the contrary, the reduction is possible if the attorney himself wants to do so, up to half. For example, if he wanted to go below this limit in charity, he would have to enter into a contract with the client to provide legal services and negotiate such remuneration in this contract.

It is necessary to add that the remuneration of a lawyer who has been appointed by the court, the remuneration must always be determined according to the lawyer's tariff. This also applies in civil proceedings. Nevertheless, in the light of the case-law, it should also be noted in this regard that the remuneration to the appointed lawyer is not ipso if he acts against the will of his client.

(b) Lump-sum remuneration

The second method of determining the lawyer's non-contractual remuneration is remuneration under Decree of the Ministry of Justice No. 484/2000 Coll., Which stipulates the amount of remuneration for representing the participant by a lawyer or a notary in the decision on reimbursement of costs in civil proceedings, amended by the decree No 177/96 on the remuneration of lawyers and the compensation of lawyers for legal services (lawyer's tariff), as amended (hereinafter also referred to as the "lump-sum lawyer tariff"). This Decree was adopted in order to facilitate the work of judges in the calculation of lawyers' fees for representation in civil court proceedings, but has since its origins been the subject of sharp criticism by the Czech Bar Association and its members, mainly because of a different concept than that of a lawyer tariff. This is in the case of a reimbursement of costs in the relation of subsidiarity and applies mainly in the case of reimbursement of overpayments and compensations for missed time because they are not adjusted in the lump-sum lawyer tariff. At the same time, however, a lump-sum lawyer tariff is in a special relation to the lawyer tariff, since it applies only to the calculation of costs in civil proceedings. The lump-sum lawyer tariff is not based on tariffs but on fixed amounts of remuneration, which are calculated on the basis of the cash amount at issue or the type of case under consideration. In the case of money valuable disputes (payment of cash, contract performance, bills of exchange and check, etc.) and for proceedings relating to the cancellation and settlement of co-ownership and joint property of spouses, the article 3 of the lump-sum lawyer tariff generally applies for the remuneration rates. In addition of these general rates of remuneration, the lump-sum lawyer tariff in its other provisions sets a number of special rates depending on the type of proceedings, at the court instance, on whether joint proceeding takes place, etc. In determining the lump-sum lawyer tariff is decisive the status at the date when the judgment was pronounced, in determining the remuneration by lawyers tariff the decisive status is the commencement of the act. It is also permitted in certain cases to reduce or increase the rate of remuneration.

In connection with the lawyer's right to remuneration, it is necessary to mention, in the context of the complexity in the following paragraphs, on his / her other financial claims to the client, and on the other hand it is also necessary to emphasize the duties of the attorney in the administration and custody of money and other assets of the client, as well as the award of the costs to the client to his / her legal representation:

III. Other financial claims of a lawyer

In addition to the entitlement to remuneration described above, the attorney is entitled to reimbursement of the cash expenses and compensation for missed time. However, common administrative costs are included in his remuneration.

The attorney is entitled to reimbursement of the cash expenses he has meaningfully spent in connection with the provision of legal services. This will in particular be the following:

  • Court, administrative, local and other fees
  • Travel expenses
  • Postage and telecommunication charges
  • Expert opinions and expert opinions
  • Translations
  • Copies and photocopies

The client is obliged to pay such expenses to the attorney, but has the right to demand their billing and the presentation of the relevant accounting documents. If the lump sum contractually stipulates, the attorney does not have to report his expenses, but he does not have the right to demand additional reimbursement if the lump sum is exceeded. In order to avoid the need for unnecessary documentation, the lawyer tariff stipulates that a lump sum of 75 crowns shall be charged to the attorney as a substitute for the costs of domestic postal, local calls and freight charges.

Compensation for missed time belongs to a  lawyer if:

  • Negotiation at a court or other body did not take place, but the lawyer was not informed about it in time, was adjourned without discussing the case or was delayed more than half an hour
  • The lawyer provided legal services at a place which is not his place of residence; the time spent on the way to the place of service and back is considered as missed time.

If the amount of compensation for missed time is not stipulated in the contract for the provision of legal services, one hundred crowns shall be charged to the attorney for each commenced half-hour. If the time is missed as a result of the adjournment of a hearing without a hearing or non-hearing, the lawyer is entitled to a refund of one half of the non-contractual remuneration.

IV. Award of lawyer's costs

On the basis of individual process instruments, the successful party of the relevant proceedings is granted the right to claim the counterparty to pay the costs of the proceedings and the remuneration paid to the lawyer.

For civil proceedings, the general principle is that a party who has been successful in the proceedings is entitled to the costs of legal proceedings, which include the cost of legal representation. If the participant in the case is only partially successful, the reimbursement of costs will be appropriately adjusted. However, these costs are not granted in all types of proceedings. Many provisions are defined in the provisions of the Code of Civil Procedure and those cannot or even may not  be decided by the court. As an exceptional situation for non-recognition of the costs of proceedings, the provisions of §150 of the Code of Civil Procedure defines "grounds of special consideration". That provision cannot, however, be regarded as a constitution of judicial arbitrariness, but a provision under which the court is required to examine whether there are special circumstances in the case which must exceptionally be taken into account when determining the obligation to pay the costs. Reasons for special consideration within the meaning of § 150 of the Civil Code may be an excusable error in the performance of a financial obligation, the absence of economic difficulties of the creditor in connection with late payment and good property relations of the creditor - the plaintiff. According to case-law, different rules for the award of compensation for the costs of a lawyer's remuneration may and should apply:

"I. If the state has relevant  organizational units, financially and personally secured from the state budget,  to fulfil its legal interests, there is no reason to transfer the exercise of  its rights and obligations to a private entity, in this case a lawyer.

II. The reasoning of the judgment must show the  relationship between factual findings and considerations in assessing evidence  on the one hand and legal conclusions on the other. If the legal conclusions of  the court are in the extreme inconsistency with the factual findings made, or  no possible interpretation arises from them, such a decision must be regarded  as standing in contradiction with Article 36 (1) of the Charter as well as  Article 1 of the Constitution. This requirement also applies to the  justification of the statement of costs. "

In administrative justice, similar rules apply as in civil proceedings. The general principle that a successful participant is entitled to reimbursement of costs is also applicable here.

In the administrative procedure, the administrative authority may decide that one of the parties to the proceedings is obliged to compensate the other participants for the costs incurred as a result of their fault.

In the criminal proceedings, the injured party may be reimbursed for the expenses necessary for the effective exercise of the claim for damages, including the costs for the lawyer. Similarly, an accused may claim reimbursement, even if it is not a classic example of a reimbursement of costs, and this claim will be claimed to the state.

The above mentioned costs are determined by the competent authority according to the lawyer tariff. In some cases, however, a different treatment is used. A particularly important difference applies to civil proceedings. If the client is successful in the civil proceedings and the court grants him the costs of legal representation, the amount of the legal representation will be determined according to the special regulation contained in the decree of the Ministry of Justice No. 484/2000 Coll., (lump-sum lawyer tariff), amended with effect from 1 September 2007. However, it must be added that, if the circumstances of the case justify this, the court may depart from this decree and decide on the amount of the costs granted according to the lawyer tariff:

"... there is no correct opinion  that" the only legal possibility for the court is to determine the amount  of remuneration for representation under the lump-sum tariff according to  Decree No. 484/2000 Coll. ".

"The court may exceptionally, if the  circumstances of the case justify it, determine the amount of remuneration for  representation pursuant to Decree No. 177/1996 Coll., It is permitted by § 151,  paragraph 2 of the Civil Code."

This decree on lump-sum tariff does not, in contrast to the lawyer tariff, deal with the number of legal services but prescribes a lump-sum rate for individual proceedings for each stage of the procedure. The advantage is the possibility of precisely determining the amount of compensation for the client at the beginning of the dispute, but on the other hand, the length and difficulty of the dispute are not taken into consideration. The client may incur much higher costs for a lawyer's contractual fee determined differently from the lawyer tariff or from the decree on a lump-sum tariff. However, clients are often unaware of this and expect that what they pay to their attorney will be fully paid by the counterparty after the winning dispute. Such a result, however, is not very common in practice, and so attorneys are obliged to instruct their client to negotiate contractual fees that the officially granted compensation is governed by divergent rules and standards.

V. Attorney's duty at administration or legal custody of money and other assets

The basic provision on the duties of a lawyer in the administration or custody of money and other assets of the client is included in the law on advocacy in the provisions of § 56 et seq. as well as the Code of Ethics. The details are set out in the Resolution of the Board of Directors of the Czech Bar Association No. 7/2004 of the Bulletin.

All property that assumed from the client in connection with the providing legal services is the lawyer obligated to guard with the care of a good manager and may use them only for the specified purpose. The written form of the contract - about custody, depositing things, etc. - is required in the case of the administration or safekeeping of property, and such a contract usually includes an agreement for the remuneration of a lawyer for such services. If the asset management fee is not stipulated by contract, the lawyer has a non-contractual remuneration of 10 per cent of the annual income from such property. Things that an attorney takes from the client must be taken care of in such a way that they can be returned to the client at the agreed time, otherwise, according to the disciplinary practice, this would be a serious breach of the lawyer's duties.

In case of saving money from the client, resp. for a client from a third party, the attorney is obliged to deposit these funds on the special bank account of the lawyer's custody. The attorney should also not neglect adequate insurance for the property thus entrusted. Additions to deposited funds belong to the client and the attorney must not unilaterally deduct the deposited funds or their additions from his remuneration, even if rightfully requested by the client.