GERMANY Law and Practice Contributed by: Daniel Engel, Antonia Hösch, Mathäus Mogendorf and Viola Sailer-Coceani, Hengeler Mueller
5. Costs, Fees and Funding 5.1 Legal Fees
ADR attempt does not limit a party’s right to litigate or arbitrate. 4.4 Timing of ADR ADR can take place at any stage of a dispute. In prac- tice, it most commonly occurs either before or shortly after litigation or arbitration has been initiated. The unilateral initiation of ADR suspends limitation periods if the dispute resolution body addressed is a govern- mental or state-recognised institution. In addition, limitation periods are suspended where the parties mutually agree to pursue ADR. Parties also typically agree expressly to suspend limitation periods for the duration of the ADR proceedings. Such agreement can be included in the agreement on certain institu- tional rules, such as Section 9 DIS Mediation Rules. 4.5 Confidentiality Under German statutory law, ADR proceedings are not generally confidential. For example, statutory con- fidentiality obligations are, in principle, imposed on mediators, but not on the parties. Parties, however, usually enter into broad confidentiality agreements to ensure confidentiality of the entire process. Some institutional rules also provide for comprehensive con- fidentiality (eg, Section 28 DIS Rules on Expert Deter- mination; Sections 6.5 and 10 DIS Mediation Rules). 4.6 Costs The allocation of costs is subject to agreement between the parties. Institutional rules vary in their approach to costs. In expert determination proceed- ings, the decision on costs is usually made by the expert and often depends on the outcome of the proceedings (eg, Section 30 DIS Rules on Expert Determination). In consensual forms of ADR, such as mediation, the default rules generally provide for cost-sharing between the parties (eg, Section 11.1
Lawyers’ fees are regulated by the Lawyers’ Remu- neration Act ( Rechtsanwaltsvergütungsgesetz ), which sets statutory fees calculated primarily on the basis of the dispute value ( Streitwert ). Lawyers and clients may agree on alternative (higher) fee arrangements. In practice, hourly fee arrangements are very common, particularly in commercial dispute resolution. Court fees are likewise based on the dispute value and are set out in the Court Costs Act ( Gerichtskostengesetz ), with a cap of EUR30 million applying to the dispute value. 5.2 Third-Party Funding The use of third-party litigation funding has grown significantly in Germany in recent years. While non- recourse litigation funding is not subject to insur- ance or financing regulation, certain legal boundaries are shaped by provisions found in broader statutes, including those regulating legal services, the legal profession, and attorney remuneration. Typically, the funding agreement is entered into between the funder and the party to the dispute, while the lawyer is sepa- rately retained by the client. Representative actions in relation to consumer mat- ters are subject to more stringent conditions: the funder may not be a competitor of or otherwise linked to the defendant, its share of any award is capped at 10%, and the entity bringing the action must make full disclosure regarding the source of funding. 5.3 Contingency Fee Arrangement Contingency fees ( Erfolgshonorare ) are generally pro- hibited for German lawyers. However, narrow excep- tions exist in case of clients who would otherwise be deterred from pursuing their claim due to their indi- vidual circumstances. These exceptions are strictly regulated and of limited relevance in a commercial context. 5.4 Insurance Legal expenses insurance ( Rechtsschutzversicherung ) is widely available and commonly used in Germany, particularly by individuals. Such insurance typically covers court fees, lawyers’ fees, and expert costs
DIS Mediation Rules). 4.7 Courts and ADR
Courts are generally supportive of the amicable reso- lution of commercial disputes and will often suggest staying proceedings to allow the parties to engage in settlement negotiations or ADR.
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