Fee Regimes and the Cost of Civil Justice

Abstract:     
The problem of costs in civil justice processes is an enduring issue. Reforms are proposed, implemented, and usually found wanting. Many of these reforms involve manipulating how lawyers are paid for their work in civil justice, a sensible approach given that lawyers’ fees comprise a very large proportion of the costs of civil justice processes.

All fee systems create a mix of positive and perverse incentives. Proposals to modify fee arrangements, either coming from reformers or from individual clients, typically fail to grasp the complexity of fee systems and how those systems interact with other aspects of the justice system. In this paper, I employ the construct of ‘‘fee regimes’’ to explicate these complications. Fee regimes as used here are comprised of three components: how fees are computed; who pays the fee; and how fees are regulated and/or reviewed. Every system involves all three elements in one way or another, and the interaction of the three elements makes it difficult to anticipate how modifying only one element will impact the incentives that motivate both lawyers and parties. Moreover, fee regimes are embedded into the expectations of the actors in a civil justice system, and those expectations are often unstated because they are assumed to be natural rather than endogenous to the fee regime. I conclude with a brief discussion of how those considering reforms might better try to anticipate the likely impacts of the changes they would make.

Keywords: legal profession, legal fees, contingency fees, cost of litigation

Accepted Paper Series