The impact of EU law on lawyers' fees

The Retained EU Law Bill, aimed at revoking a large amount of EU-derived legislation within a tight timetable, is raising some of the old emotions of Brexit, which I had hoped were disappearing into the past.

The bill is a minefield requiring specialist knowledge. It was reported a few days ago that the Department for Business, Energy and Industrial Strategy (BEIS) spent £600,000 on staffing costs alone in just two months as part of its review of laws and regulations under the bill – and it has a smaller workload in this area than other government departments.

I mention this to introduce a case from the Court of Justice of the European Union (CJEU) on an area of law which falls right under the new Bill’s jurisdiction – consumer rights, in a decision which turned on how lawyers charge their clients. The decision was handed down last week in Case C‑395/21 in D.V. v M.A. (where D.V. is a Lithuanian lawyer).

Before moving on to a discussion of the case, here is how this area of law will be affected by the Retained EU Law Bill. On the one hand, the Consumer Rights Act 2015 should be unaffected since it is an act of parliament. On the other, there are some notable pieces of retained EU law which will need to be addressed in response to the bill, including the Consumer Protection from Unfair Trading Regulations and the Consumer Contracts Information Amendment Regulations, which provide a significant part of the UK’s current consumer protection framework. The government’s approach to these rights is not known.

The facts behind the CJEU case are simple. A lawyer told her client that she would charge the client €100 per hour for a series of transactions that the client wanted performed. The law on this simple agreement troubled the courts in Lithuania all the way up to the Supreme Court, which then referred the matter to the CJEU for a preliminary ruling.

There were a number of questions to be settled, but they boiled down to a simple one: is a charging rate of €100 per hour without more an unfair contract term? The question was framed within consumer rights, whereas here it might be seen more as a regulatory question to be settled by the SRA – more on this aspect below.

In a key sentence answering the question, the court decided:

‘In the absence of any other information provided by the supplier, such a mechanism for determining the price does not enable an average consumer, who is reasonably well informed and reasonably observant and circumspect, to estimate the financial consequences of that term, that is to say, the total amount to be paid for those services.’

The court admitted that it is often difficult to predict at the time of the contract exactly how many hours will be spent on legal services. But the client must be given ‘particulars that enable the consumer to assess the approximate total cost of those services’, such as ‘an estimate of the expected number or minimum number of hours needed to provide a certain service, or a commitment to send, at reasonable intervals, bills or periodic reports indicating the number of hours worked’. This had not happened here, where the client received a bill only at the end. A Lithuanian court estimated that the total came to €12,900 – which might not seem to our UK ears so high as to justify such extensive litigation.

There were other questions to be settled, such as what to do if the term regarding payment was considered unfair and had to removed. But, for us, the main outcome was that a simple fee of €100 per hour without more was considered as not satisfying the requirement under EU law of being drafted in plain intelligible language (Article 4(2) of Directive 93/13, as amended by Directive 2011/83).

In England and Wales, the SRA has already approved stringent transparency rules in pricing for certain common transactions, and the Law Society and the SRA have provided otherwise general guidance. The Law Society says that a solicitor should tell clients how much their case is likely to cost at the outset and keep them updated about costs during the process. And the SRA says that a lawyer should generally provide the best information possible; if not paying under a fixed fee agreement, the client should be kept up-to-date with costs as the matter progresses.

To return to the Retained EU Law Bill, our own consumer law and regulations were passed when we were still within the EU, and so satisfy the minimum requirements of EU law, although member states are permitted to have stricter conditions. Will our current level of consumer rights continue if and when the bill becomes an act of parliament?

Jonathan Goldsmith is Law Society Council member for EU & International, chair of the Law Society’s Policy & Regulatory Affairs Committee and a member of its board. All views expressed are personal and are not made in his capacity as a Law Society Council member, nor on behalf of the Law Society

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