A Law and Economics Perspective on the EU Directive on Representative Actions

This article provides an analysis of the Directive on representative actions for the protection of the collective interests of consumers of 25 November 2020. The Directive enables qualified entities to bring representative actions on behalf of the consumer. The article uses a Law and Economics approach to stress the advantages of collective actions as a tool to remedy rational apathy and free-rider behaviour. The article therefore in principle welcomes the fact that this Directive will lead to all Member States having some form of collective redress. However, it is rather difficult to fit this Directive into the economic criteria for centralization as there is no obvious danger of cross-border externalities or a race-to-the-bottom. The article is critical of the fact that the Directive only provides for a representative action and does not mention the alternative of a group action (sometimes referred to as a class action). This is especially problematic if there are very few qualified entities that could bring the representative action. Furthermore, the fact that Member States may choose an opt-in procedure instead of an opt-out procedure is critically evaluated. The most problematic aspect of the Directive is the funding of the representative action. Punitive damages and contingency fees are rejected, and the possibility of third-party funding is restricted. It is therefore to be feared that this Directive, notwithstanding the good intentions, may not lead to much application in practice, since the question of how the representative action is to be financed is not resolved in any satisfactory manner.

"Success Fee": Old Song, New Tune

The research featured substantive and procedural peculiarities of contract costing for legal assistance through the so-called "success fee", or contingency fee, from the point of view of various legal approaches. The contract costing for legal services based on contingency fee does not comply with the current Russian law. Therefore, it can be difficult for the lawyer to collect the fee from the customer. Though courts do acknowledge contingency fees, the related business practice remains legally unregulated. The situation did not change in 2013 when the institution of invalidity of legal transactions was reformed in civil law. The issue belongs to the substantive sphere, since the procedural area reveals no peculiarities in reimbursing expenses incurred to pay for the services of a legal representative. The recent innovations of legal regulation on "success fee" are related to the new edition of the Federal Law "On Advocacy and the Legal Profession in the Russian Federation", which entered into force on March 01, 2020. The authors believe that the problem is not the matter of advocacy legislation because it would then contradict with the Civil Code of the Russian Federation, which has priority over other regulations in this case. They criticize the obvious lobbying of legally enforceable precautions to include stipulated remuneration on legal assistance, as well as the substantial restrictions on the rights of private lawyers with no attorneyship.

Civil Justice Reform

This short chapter summarises the philosophy which underlies the package of reforms, for which I was responsible. Controlling costs in advance, either by ad hoc budgeting or by fixed costs for lower value cases was essential. So was the abolition of recoverable success fees and recoverable ATE insurance premiums, since these drove up litigation costs unacceptably. Another essential element of the reforms was increasing the range of methods available for funding litigation. This recommendation has led to an increase in the use of third party funding and the enactment regulations to permit damages based agreements (otherwise known as contingency fees). Those regulations have some technical defects, but there is now a report before the Ministry of Justice explaining how such defects should be put right, and it is hoped those recommendations will be carried forward by the Ministry of Justice.

Improving Access to Justice: Do Contingency Fees Really Work?

While not touted as a universal panacea for access problems, contingency fees have received general praise as an important and justice-improving initiative. By back-loading the payment of legal fees, the assumption is that the interests of clients and litigants will be better served. I challenge that received wisdom. While the rise of contingency fee agreements between lawyers and clients has increased the number of people who can afford lawyers and make successful claims, the more challenging issue is whether that increase is being achieved at too high a price to clients and litigants – while more people are able to bring a case, which they could not otherwise have done, they will be receiving far less than they might actually be entitled to. In short, do contingency fees work as much or more to the advantage of lawyers than clients? I suggest not.

US State Tort Liability Reform and Entrepreneurship

Tort and civil liability reform has been a hotly debated issue across US states. This has spawned a large theoretical and empirical academic literature that evaluates the implications of such reform and the impact that it can have on various aspects of an economy. This study adds to that literature by considering how various tort reforms affect entrepreneurial activity across states. The study employs the Database of State Tort Law Reforms (6th Edition) and utilizes the Kauffman Index – an index of entrepreneurial startup activity – between 1996 and 2016, finding that liability reform is generally positively associated with increased entrepreneurial activity. These results are largely driven by joint and several liability, caps on noneconomic damages, limits on contingency fees, and collateral source rules though this latter result is somewhat less robust, while the effects of joint and several liability do not persist through time.

Class actions: The flood that never came

After 25 years of class actions in Australia, it is worth reviewing whether the predictions made – that part IVA of the Federal Court of Australia Act 1976 would result in an Americanised litigious culture and a flood of spurious claims – came to pass. This article argues that the flood was more of a trickle and that Australia's unique combination of cost shifting rules, contingency fees and judicial supervision have mitigated against the deluge. It takes the position that Australia has struck the right balance between access to justice and protection against vexatious or unmeritorious claims.

The Impact of Contingency Fees on Collective Antitrust Actions: Experiments from Lithuania and Poland

Contingency-fee agreements are one—if not the only—tool that can be used to ensure that small-stakes collective antitrust actions are heard, yet they are subject to strong resistance from the European Union. There is a concern that contingency fees could lead to abuses of the system or conflicts of interest, as has been seen in the United States. Contrary to eu policy, two proactive member states—Lithuania and Poland—have introduced the possibility of using contingency fees in group litigation in order to facilitate group actions. Despite having a lot of potential, this paper will demonstrate that the introduction alone of contingency fees will not facilitate the compensation objective that is embedded in the Directive on damages actions. In addition, it will show that the safeguard policy against frivolous litigation is sufficient to limit the possibilities for litigation abuses, but it is ineffective for monitoring the individual behavior of group representatives.

VI. Streit um Anwaltskosten in der frühen Neuzeit

Argument about legal fees in the early modern period. Part 1: Methodic foundation, advocates’ contracts and payment modalities. Early modern records of proceedings consist mainly of advocates’ legal papers. Nevertheless, one does know just a little about the procurators and advocates and their cooperation with the legal parties, especially if they were no aristocrats, but subjects. However, if the parties did not pay their advocate and the advocates then asserted their fee claim in court, a number of records of proceedings have regularly survived and provide full information about the advocate’s and client’s relation. Next to the proxy, there was the commission as actual advocates’ contract. Regardless of the normative standards, the procurators drafted their contracts mostly as continuing obligations in addition with a yearly fixed fee. The contribution analyses and compares the practical contracting at the Imperial Chamber Court with the Imperial Aulic Council and the Wismar Court of Appeal. Herein the Arrha, an additional item on the invoice, and the attempt to assert contingency fees come into focus. Methodically, the paper pleads in favour of the history of legal practice, which in its valuations renounces itself mostly from the standards of normative sources.