Legal Advisory Fees under Control

In the past few years have witnessed multiple vivid examples of adjudging disproportionately high court expenses on cases regarding collection of receivables. Such are typically cases of mobile operators, district heating companies, electricity suppliers, water suppliers, etc. One of the reasons for the high expenses is the legal advisory fee. Since the end of January 2017 amendments in the Civil Procedure Code have been in force. The amendments restrict the amount of these fees and although they do not discard them, at least they minimize them up to bearable levels.

Some fundamental principles regarding court expenses

To begin with, it would be useful if we remind ourselves with the fundamental principles of adjudging court expenses. Court expenses are comprised of state fees, remunerations for expert reports and attorney’s or legal advisory fees. Regardless of the nature of the case (civil, trade or administrative), the expenses are borne by the side that lost. Only the actually paid amounts are adjudged, not the negotiated ones.

It is accepted that the adjudging of court expenses aims to finance the judicial system, to compensate the expenses made by the side that won the case and to limit the unreasonable initiation of proceedings.

What was the regulation up until now?

Before the latest amendments in the Civil Procedure Code, legal advisory fees equal to the minimum attorney’s fee pursuant to the Ordinance on the Minimum Sizes of the Attorney’s Fees were adjudged to the sides that were represented by Juris consults. For example, if Sofia Heating initiated proceedings against a client for a debt of BGN 100, the legal advisory expenses could have reached up to BGN 900 if the procedure went through every possible stages of the order proceeding and the adversary proceeding.

The problem with adjudging legal advisory fees

Juris consults are employees under an employment relation or an ex officio relation and receive salaries. They do not negotiate and do not receive separate remuneration in line with the nature and material interest of the cases on which they represent. Respectively, their employers do not make separate expenses for this purpose.

In contrast to juris consults, attorneys practice a freelance profession and the relations between them and their clients are arranged with contracts based on the principle of free negotiation. The Ordinance’s rules set the measure for determining the attorney’s fees.

Because of the mentioned difference, adjudging legal advisory fees leads to a unjust enrichment of the side which was represented by a juris consult since that side without having to make the relevant expenses receives a remuneration in the size of the minimum attorney’s fee.

What is being changed?

With the new rules, legal advisory fees shall be adjudged to legal persons and sole traders who are represented by juris consults. These fees, however, shall be limited in size according to the relevant nature of the case under the Legal Assistance Act. This law envisages legal advisory fees which are lower than the attorney’s fees under the Ordinance.

If we return back to the example with the user’s debt of BGN 100 to Sofia Heating, under the new rules the legal advisory fee for order proceedings shall be between BGN 50 and BGN 150, and for the adversary proceedings – between BGN 100 and BGN 300. The judge shall determine the size of the specific size of the fee with regard to the complexity of the case. This way in optimal circumstances legal advisory fees can be limited overall to BGN 250 instead of the previous BGN 900.

Impacts on administrative and tax cases

The amendments have importance to administrative cases, for instance – cases for issuing administrative acts – permits for carrying out certain activities, imposing sanctions from the Directorate for National Construction Control, the Executive Agency “General Labour Inspectorate”, etc.

The amendments however shall not affect the legal advisory fees on tax cases. The tax authorities preserve their right to legal advisory fee for every court instance in the size of the minimal attorney’s fee pursuant to the Ordinance.

The amendments in the regulation put the legal advisory fees in mass user, civil, trade and administrative legal disputes under control. The amendments are a step forward in the direction of complying the legal advisory fees with the principles of preventing unjust enrichment and adjudging actually made expenses.

This article has been published in investor.bg

Author: Doychin Ivanov, Attorney-at-law