Lately a couple of interesting blog postings (especially Toby Brown's on 3 Geeks and a Law Blog), as well as articles have been published around the issue of billing by the hour or so-called "alternative billing". Having been educated and practiced in Germany, a legal system that lives and breathes anything but billing by the hour, I have been astonished for the longest time, how law firms can charge clients as much as they do, when said clients might not know what the bill will look like in the end.
The fees set by German lawyers are calculated on the basis of either the law on the remuneration of lawyers, the Rechtsanwaltsverguetungsgesetz (RVG) or on the basis of negotiated fees. The negotiation of fees is always a possibility but it has to be set in writing and the sect. 4 RVG as well as sect. 49 Bundesrechtsanwaltsordnung (BRAO) have to be taken in consideration. German law does not allow the negotiation of a fee that would only be paid in case of success.
How is the RVG organized? The RVG does contain general provisions regarding fees as well as an appendix listing individual acts performed by the attorney and the respective applicable rate. It provides for a number of different types of fees, which are either fixed or within a fixed range.
How is a fee set? If the fee is to be determined within a fee range, the attorney chooses the amount at her own discretion in an equitable manner. She has to take into account the circumstances linked with the case, especially scope and difficulty of the legal work, importance of the matter as well as the income and financial well-being of the client (sect. 14 (1) RVG). Additionally her risk of liability might be taken into consideration.
More information regarding the different types of legal work in the upcoming part 2.