I’m asking for opinions and thoughts on the pending introduction of contingency fees in Dutch litigation. I’ll start with the facts.
Up to now, Dutch bar rules prohibited lawyers from agreeing on full contingency fees. What was allowed, was a flat fee plus a contingent part dependent on the outcome. Recently the bar association has proposed removing the prohibition only for claims based on personal (physical) injuries.
From what I’ve read on the American legal system, contingency fees seem to work fairly well. However, there are certain differences between the American and Dutch legal system that make me wonder whether it would work just as well over here.
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As far as I understand it, the U.S. system is that the lawyer will pay all costs up front and only be reimbursed if he wins. The idea over here is, if I’m correct, that contingency fees only apply to legal fees of the lawyer himself; the client still would have to pay up front court fees and third party fees (such as for expert reports).
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Dutch law has a limited ‘loser pays’ system. The loser in a suit, regardless of whether he had good reason for taking his standpoint, has to pay the ‘liquidated’ costs of the other party. This means that the winner is awarded costs based on a points system, multiplied by a factor dependent on the amount of the claim. Actual legal fees are usually (much) higher, so even if you win, you stand to lose somewhat on legal fees.
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Dutch law does not allow punitive damages. Therefore the plaintiff can never get more than his actual damages. Even if you include moral damages, the contingency fee would therefore cut into the award for the actual damages. Of course, with an hour-based system you can get to the same financial result.
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Insurance is fairly common. This includes insurance for health care and legal liability (very common) and insurance for instituting (or defending) certain claims (not so common, but still a lot of people have it). With the latter kind of insurance, a client would not need contingency fees since the insurance company will pick up the costs. With the former kind, the insurance company will pay your actual costs, and handle the suit in your name.
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There is a state subsidised possibility for legal access (in fact, that is going to be a European requirement as well). Hence really poor people will get subsidised (sometimes in full) for the legal fees. They still have to pay court fees, and will have to pay the other parties’ fees if they lose.
To me, these differences are a reason why there is a lesser need for contingency fees, and there exists resistance among lawyers as well. There is no chance of a ‘jackpot’ outcome (except possibly in a class action suit). And it helps to refuse a suit with little chance of succes if the client has to be prepared to pay the costs himself. Contingency fees would remove or lower the treshold of frivolous suits.
Do you think contingency fees would work in such a system? I’m also interested in hearing experiences, or corrections of fact in the above.
For the record, I have already read a couple of threads on related topics: